4 Types of GST in India Explained Simply: CGST, SGST, IGST and UTGST (2026 Guide)

The types of GST in India are four: CGST, SGST, IGST, and UTGST. Which one applies to your transaction depends on one simple question are the buyer and seller in the same state, or different states? For intra-state sales (within the same state), you pay CGST plus SGST. For inter-state sales, you pay IGST. For sales within Union Territories without a legislature, UTGST applies instead of SGST.

Say your business is in Pune and you sell software services to a client in Pune. You charge 18% GST  split as 9% CGST and 9% SGST. That same sale to a client in Delhi? You charge 18% IGST instead, and no CGST or SGST appears on the invoice.

GST replaced over a dozen central and state taxes when it launched on July 1, 2017. The four-type structure exists because India has a dual tax system  both the central and state governments have constitutional authority to levy taxes. This guide covers all four types, how ITC flows between them, and what changed in 2026.

 

What Is CGST and How Does It Work?
CGST (Central Goods and Services Tax) is the central government's share of tax on any sale that happens within a single state. It is governed by the CGST Act, 2017, specifically Section 9.

CGST always appears alongside SGST on intra-state invoices. The rate is exactly half the total GST rate. If the applicable GST rate on a product is 18%, your invoice shows 9% CGST and 9% SGST  never 18% CGST alone.

Example: Rahul runs a hardware shop in Jaipur and sells goods worth Rs. 10,000 to a buyer in Jaipur. GST rate is 18%.

• CGST: Rs. 900 (goes to the Central Government)

• SGST: Rs. 900 (goes to Rajasthan State Government)

• Total Invoice Value: Rs. 11,800

The Central Government uses CGST revenue to fund national schemes, defence, and central expenditure. You can claim CGST paid on your purchases as Input Tax Credit against your CGST liability when filing your GST returns.

What CGST Covers
CGST applies to every category of taxable goods and services supplied within a state  except alcohol for human consumption and certain petroleum products, which are outside GST entirely. The rate structure under CGST mirrors the overall GST slabs: 0%, 2.5%, 6%, 9%, and 14% (these are CGST-only rates, which when combined with equal SGST rates give the standard 0%, 5%, 12%, 18%, and 28% total slabs).

What Is SGST and When Does It Apply?
SGST (State Goods and Services Tax) is the state government's share of tax on intra-state supplies. It runs parallel to CGST on every local sale.

Each state has its own SGST Act but the rates mirror CGST rates. Revenue collected under SGST goes entirely to the respective state government it does not flow to the Centre. This is why the dual structure matters: states need a reliable tax revenue stream, and SGST gives them exactly that.

Example continued: In Rahul's sale above, the Rs. 900 SGST goes to the Rajasthan government. If the buyer was in Gujarat instead, that Rs. 900 would flow to Gujarat  not through SGST but through IGST settlement, which we cover below.

States vs. Union Territories with Legislature
Delhi, Puducherry, and Jammu and Kashmir have their own legislative assemblies. They levy SGST, not UTGST. This distinction matters when you check which act governs your transaction. For these three, the SGST framework applies even though they are technically Union Territories (or a UT with special status, in J&K's case).

What Is IGST and When Is It Charged?

IGST (Integrated Goods and Services Tax) applies to three types of transactions:

1. Inter-state supply  goods or services moving from one state to another

2. Imports  goods coming into India from outside

3. Supplies to or from SEZ units  these are treated as inter-state under the IGST Act

The IGST rate equals CGST rate plus SGST rate combined. So if a product attracts 18% GST, the IGST rate is 18%  the full amount collected by the Central Government. The Centre then settles the state's share with the destination state after collection.

Example: A textile manufacturer in Surat ships fabric worth Rs. 2,00,000 to a retailer in Kolkata. GST rate: 5%.

• IGST charged on invoice: Rs. 10,000 (5% of Rs. 2,00,000)

• The Central Government collects the full Rs. 10,000

• West Bengal (destination state) receives its 2.5% share through inter-government settlement

This is the key design of IGST  it prevents tax cascading across state borders. The destination state gets revenue based on consumption, not where the goods originated.

IGST on Imports
Every import into India attracts IGST in addition to Basic Customs Duty. The IGST on imports is calculated on the assessable value plus customs duty, not just the goods value alone. A business importing machinery worth Rs. 5,00,000 with 10% BCD would pay IGST on Rs. 5,50,000 (the customs-inclusive value).

You can claim the IGST paid on imports as ITC in your GSTR-3B, which means it does not become a sunk cost for registered businesses.

What Is UTGST and Where Does It Apply?

UTGST (Union Territory Goods and Services Tax) is the counterpart of SGST but for Union Territories that do not have a legislature of their own.

It applies in:

• Andaman and Nicobar Islands

• Chandigarh

• Dadra and Nagar Haveli and Daman and Diu

• Lakshadweep

• Ladakh

For intra-UT transactions in these territories, CGST and UTGST are charged, not CGST and SGST. The rate structure is identical to SGST. Revenue from UTGST goes to the respective Union Territory administration.

Example: A business in Chandigarh sells services worth Rs. 50,000 to another business in Chandigarh. GST rate: 18%.

• CGST: Rs. 4,500

• UTGST: Rs. 4,500

• Total: Rs. 9,000

If that same Chandigarh business sells to a buyer in Punjab, the transaction becomes an inter-state  IGST of Rs. 9,000 applied instead.Quick Comparison: CGST vs. SGST vs. IGST vs. UTGST

How ITC Works Across the 4 Types of GST
Input Tax Credit (ITC) is the core mechanism that prevents double taxation in GST. You pay GST on your purchases, then offset that against the GST you collect from customers. But the offset follows a specific order.

The mandatory rule: exhaust all IGST credit before touching CGST or SGST credit.

After IGST credit is zero, use CGST credit against CGST liability, and SGST credit against SGST liability. One rule that never changes: CGST credit cannot be used against SGST liability, and SGST credit cannot be used against CGST liability. These two heads are permanently walled off from each other.

2026 Update: Flexible ITC Utilisation (February 2026 Onwards)
This is one of the more practical changes in recent GST history. Before 2026, once IGST ITC was exhausted, the portal forced a rigid sequence  CGST credit had to be used first against any remaining IGST liability, then SGST. This trapped working capital unnecessarily.

From February 2026 onwards, once IGST ITC is fully utilised, the portal no longer forces a sequence between CGST and SGST credit. Taxpayers can now apply CGST and SGST credits against residual IGST liability in any sequence they prefer  CGST first, SGST first, or any split.

Why this matters:
Say you have Rs. 50,000 CGST credit and Rs. 80,000 SGST credit, and Rs. 40,000 IGST liability remaining after IGST credit runs out. Before 2026, the portal forced you to use CGST credit first. Now you can use whichever credit is more useful to preserve the balance you'll need next month.

CGST and SGST cannot be cross-utilised against each other under any circumstance. That rule has not changed.

The mandatory ITC order in 2026 is:

1. IGST credit → first against IGST, then against CGST, then against SGST (any proportion)

2. CGST credit → against CGST liability; against IGST if IGST credit is exhausted

3. SGST/UTGST credit → against SGST/UTGST liability; against IGST if IGST credit is exhausted

To manage ITC correctly across all four heads, make sure you file your GST returns on time. Late or incorrect filings distort ITC claims and can trigger interest under Section 50 of the CGST Act.

Is There a 5th Type of GST in India?

Some people ask about a "fifth type" of GST. There is no fifth type in law. However, you will often see a fifth component on high-value or demerit goods: the GST Compensation Cess.

The Compensation Cess was introduced to compensate states for revenue loss during the GST transition period (initially set to end in 2022, but extended due to COVID). It applies over and above the regular GST rate on goods like:

• Luxury cars

• Pan masala and tobacco products

• Aerated drinks

This cess is not a type of GST in the same sense as CGST or IGST  it is an additional levy collected alongside GST. Certain tobacco-related products continue under the existing GST and compensation cess structure until the related loan and interest obligations are fully discharged.

So technically, while the structure has four types of GST, a fifth column (Compensation Cess) can appear on some invoices.

GST Rate Slabs in 2026: What the 4 Types Apply To

As of 2026, India primarily operates with five main GST slabs: 0%, 5%, 12%, 18%, and 28%. These are total GST rates. For intra-state sales, split them equally between CGST and SGST. For inter-state, the full rate is IGST.

The 56th GST Council meeting in 2025 recommended a significant GST rate rationalisation. Major GST rate rationalisation changes took effect from 22 September 2025, but the revised structure is item-specific  businesses should not assume that every product now fits into a simple universal four-slab model.

For the correct rate on your specific product or service, check the HSN/SAC code on the official CBIC portal (cbic.gov.in) or the GST rate schedule.

Frequently Asked Questions 

Q1 What are the 4 types of GST in India? A: The four types are CGST (Central GST), SGST (State GST), IGST (Integrated GST), and UTGST (Union Territory GST). CGST and SGST apply together on intra-state sales. IGST applies on inter-state sales and imports. UTGST replaces SGST in Union Territories without a legislature.

Q2. What is the difference between CGST and SGST? A: Both apply on the same intra-state transaction, at equal rates. CGST revenue goes to the Central Government. SGST revenue goes to the respective state government. On an 18% GST invoice, 9% is CGST and 9% is SGST  both collected by the seller and paid to their respective governments through the GST portal.

Q3. What is IGST and when is it applicable? A: IGST applies when goods or services cross a state border  either as an inter-state sale, an import, or a supply to/from an SEZ unit. The Central Government collects IGST and later settles the destination state's share. The rate is the full GST rate (not split).

Q4. What is UTGST and which territories does it cover? A: UTGST applies in Union Territories without a legislative assembly: Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, Lakshadweep, and Ladakh. Delhi, Puducherry, and J&K have their own legislatures, so SGST applies there instead.

Q5. Can CGST credit be used to pay SGST liability? A: No. CGST and SGST credit cannot be cross-utilised against each other under any circumstance. CGST credit can only offset CGST liability or IGST liability (after IGST credit is exhausted). SGST credit works the same way for SGST and IGST.

Q6. What is the new ITC rule for CGST and SGST from 2026? A: From February 2026, once all IGST credit is exhausted, taxpayers can use CGST and SGST credit against residual IGST liability in any order they choose. Earlier, the portal forced CGST credit to be used first. This change (per GSTN Advisory 647/649) gives taxpayers flexibility to manage working capital more efficiently.

Q7. Is IGST charged on imports into India? A: Yes. Every import attracts IGST in addition to Basic Customs Duty. IGST on imports is calculated on the assessable value plus customs duty. The IGST paid at the time of import is eligible for ITC, which you can claim in GSTR-3B after filing.

Q8. What happens if I charge CGST and SGST on an inter-state sale by mistake? A: You must issue a credit note for the incorrect invoice and raise a fresh invoice with IGST. The recipient cannot claim ITC on wrong-head taxes, and you will face interest on the correct tax amount. It is worth verifying the 'place of supply' under the IGST Act before raising interstate invoices.

Q9. Which GST type applies when both buyer and seller are in different Union Territories? A: When a sale happens from one UT to another UT  say Chandigarh to Andaman Islands  it is treated as inter-state. IGST applies, not UTGST. UTGST only applies to intra-UT transactions (buyer and seller within the same UT).

Q10. What is the GST registration threshold in 2026? A: The standard threshold is Rs. 40 lakh aggregate annual turnover for businesses supplying goods exclusively within a state. For services, the threshold is Rs. 20 lakh (Rs. 10 lakh for special category states). Businesses crossing these limits must obtain GST registration.

Q11. How do I know which type of GST to charge on my invoice? A: Check the 'place of supply' under the IGST Act. If the place of supply is the same state as the supplier's location  charge CGST and SGST. If different  charge IGST. For services, the place of supply rules are more specific and depend on the nature of the service. You can verify a GSTIN or consult the IGST Act for service-specific supply rules.

Q12. What is the 3-year rule for GST returns in 2026? A: From January 2026, the GST portal blocks filing of returns older than three years. If you have unfiled returns from before October 2022, the portal will not accept them. The CGST Act now restricts filing across multiple return types, and this time-bar has been embedded within the statute itself. File any pending returns before they cross this window.

Understanding GST Types Is Not Optional  It Is Compliance

Getting the GST type wrong on your invoice is not just a clerical error. If you charge CGST and SGST on an inter-state sale (or vice versa), your buyer loses ITC, you face interest and penalties, and you have to issue credit notes and fresh invoices. That creates a compliance chain nobody wants.

The four types  CGST, SGST, IGST, and UTGST  exist to protect the constitutional rights of both central and state governments to collect tax. Understanding which applies in your transactions is basic GST literacy.

If you need to file GST returns, check your ARN status, or sort out your GST registration, the team at gstregistration.co can help you get it right.

 

About the Author

Hemant Mali | SEO Intern