CGST, SGST, and IGST are three components applied when you create a GST invoice. However, most businesses struggle to determine which one to use and when.
Simple rule: If you sell goods from Maharashtra to Madhya Pradesh, apply IGST. If you sell within Maharashtra, apply CGST and SGST. Need detailed clarification? Let's understand how.
What Does CGST Mean?
CGST = Central Goods and Services Tax
This tax is collected by the central government. When both you and your buyer are in the same state, CGST is applied. It represents half of the total rate — the other half is SGST.
What Does SGST Mean?
SGST = State Goods and Services Tax
This tax is collected by the state government. When both seller and buyer are in the same state, SGST is applied.
What Does IGST Mean?
IGST = Integrated Goods and Services Tax
This applies to inter-state transactions. If you sell from Uttar Pradesh to Delhi, IGST is applied. The full tax rate is charged as a single amount on one line.
Simple Comparison Table
| Scenario | Tax Lagega | Rate | Example |
|---|---|---|---|
| Same State Seller and buyer in same state |
CGST + SGST | Split equally (18% = 9% CGST + 9% SGST) |
Sale within Madhya Pradesh |
| Different States Seller and buyer in different states |
IGST | Full rate (18% IGST = 18%) |
Sale from Madhya Pradesh to Delhi |
| Imports From foreign country |
IGST | Full rate | Importing parts from China |
| E-commerce Sale on online platform |
Based on buyer location | CGST+SGST or IGST | Sale via Amazon |
What Is a State Code?
The first 2 digits of your GSTIN represent the state code. This identifies which state your business is registered in.
Some examples:
- 27 = Maharashtra
- 23 = Madhya Pradesh
- 07 = Delhi
- 08 = Gujarat
- 06 = Chhattisgarh
If your GSTIN is 27AABCD1234D1Z5, you are registered in Maharashtra. If the buyer's GSTIN is 23DEFGH5678G2Z9, they are from Madhya Pradesh. Different state codes mean IGST applies.
Practical Examples for Clarity
Example 1: Same State (CGST + SGST)
Scenario: You are located in Pune, Maharashtra. Your buyer is also in Mumbai, Maharashtra. You sell goods worth Rs. 1,000 at an 18% tax rate.
- Taxable Value: ₹1,000
- CGST (9%): ₹90
- SGST (9%): ₹90
- Total Tax: ₹180
- Final Amount: ₹1,180
Example 2: Different States (IGST)
Scenario: You are located in Pune, Maharashtra (state code 27). The buyer is in Delhi (state code 07). You sell the same Rs. 1,000 worth of goods at an 18% tax rate.
- Taxable Value: ₹1,000
- IGST (18%): ₹180
- Total Tax: ₹180
- Final Amount: ₹1,180
Note: The total amount remains the same, but the tax is not split between CGST and SGST. Instead, IGST is shown as a single line item.
GSTBill.app Automatically Calculates Tax
How it works:
When you create an invoice on GSTBill:
- Enter your GSTIN — GSTBill reads your state code automatically
- Enter buyer's GSTIN — the buyer's state code is read automatically
- If state codes match, CGST + SGST is applied automatically
- If state codes differ, IGST is applied automatically
- Invoice PDF is ready with the correct tax breakdown
You don't have to manually calculate anything. GSTBill handles it all.
Common Mistakes
- Writing both CGST+SGST and IGST together — This is incorrect. Use either one or the other, never both.
- Not checking the state code — Read the GSTIN; the first 2 digits represent the state code.
- Writing the wrong tax rate — For 18%, it should be 9+9 (same state) or 18 (different state).
- Entering the buyer's GSTIN incorrectly — This will result in incorrect tax breakdown on the invoice.
What About Exports?
If you export goods to foreign countries, zero GST applies (IGST 0%). However, this has its own procedures involving LUT/bond requirements. We've covered this in a separate blog post.
Related Resources:
Summary
CGST + SGST applies for same-state invoices. IGST applies for different-state invoices. The total tax rate remains the same, but the breakdown differs. GSTBill automatically detects the scenario and applies the correct tax.
Don't Worry About CGST, SGST, or IGST Selection
GSTBill chooses automatically. Enter your GSTIN, select the buyer, and everything is set.
Try on WhatsApp (Free) →30 bills/month free. Automatic CGST/SGST/IGST calculation. No manual math needed.