Q. How a particular transaction of goods and
services would be taxed simultaneously under
Central GST (CGST) and State GST (SGST)?
Ans. The Central GST and the State GST would be levied
simultaneously on every transaction of supply of goods and
services except the exempted goods and services, goods
which are outside the purview of GST and the transactions
which are below the prescribed threshold limits. Further,
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both would be levied on the same price or value unlike
State VAT which is levied on the value of the goods inclusive
of CENVAT.
While the location of the supplier and the
recipient within the country is immaterial for the purpose
of CGST, SGST would be chargeable only when the supplier
and the recipient are both located within the State.
Illustration I: Suppose hypothetically that the rate of CGST
is 10% and that of SGST is 10%. When a wholesale dealer
of steel in Uttar Pradesh supplies steel bars and rods to
a construction company which is also located within the
same State for, say Rs. 100, the dealer would charge CGST
of Rs. 10 and SGST of Rs. 10 in addition to the basic price
of the goods. He would be required to deposit the CGST
component into a Central Government account while
the SGST portion into the account of the concerned State
Government. Of course, he need not actually pay Rs. 20 (Rs.
10 + Rs. 10 ) in cash as he would be entitled to set-off this
liability against the CGST or SGST paid on his purchases
(say, inputs).
But for paying CGST he would be allowed to
use only the credit of CGST paid on his purchases while
for SGST he can utilize the credit of SGST alone. In other
words, CGST credit cannot, in general, be used for payment
of SGST. Nor can SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the
rate of CGST is 10% and that of SGST is 10%. When
an advertising company located in Mumbai supplies
advertising services to a company manufacturing soap
also located within the State of Maharashtra for, let
us say Rs. 100, the ad company would charge CGST of
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Rs. 10 as well as SGST of Rs. 10 to the basic value of
the service. He would be required to deposit the CGST
component into a Central Government account while
the SGST portion into the account of the concerned State
Government. Of course, he need not again actually pay
Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to
set-off this liability against the CGST or SGST paid on
his purchase (say, of inputs such as stationery, office
equipment, services of an artist etc). But for paying
CGST he would be allowed to use only the credit of CGST
paid on its purchase while for SGST he can utilise the
credit of SGST alone. In other words, CGST credit cannot,
in general, be used for payment of SGST. Nor can SGST
credit be used for payment of CGST
