SGST Full Form
The full form of SGST is State Goods & Services Tax or State GST.
What is SGST?
The State Goods & Services Tax – SGST as per its name is the taxes levied on goods and services by the State government. Under GST, every state has different rules as applicable for the various categories of goods and services. SGST monitors the movement of goods and services within the State. This means that when there is an intra-state movement of goods and services, the dealer or service provider is required to deposit a portion of taxes to the State government he/she belongs to.
The revenue collected from SGST belongs to the respective State government only. As per the GST Act, any movement of goods or services within the State will be charged SGST. Thus all the indirect taxes applied by the State Governments will be subsumed into SGST. These indirect taxes include State VAT, Central Sales Tax paid to the State, entertainment tax and amusement tax (except those levied by the local authorities), taxes of gambling, lotteries, and betting. Under GST, both the governments have equal responsibilities to perform duties in order to raise resources. Thus a dual GST ie SGST and CGST will ensure to keep the Constitutional needs of fiscal federalism.
Rate – explain with an example:
Say Mr. A, a manufacturer of cars sells goods to his dealer Mr. B in Maharashtra worth Rs 10 lakhs. The GST rate of cars being 28%. Now Mr. B will be charged Rs 2,80,000 as GST. This amount of tax will be divided equally into CGST and SGST ie Rs 1,40,000 each. It is the responsibility of Mr. A to deposit the CGST of Rs. 1,40,000 to Central government and SGST of Rs 1,40,000 to the State of Maharashtra. In this way, both the governments earn revenue from the transaction. Since GST is a consumption based tax, it is important to find out where the product is ultimately consumed and not where it has been manufactured. The benefit of this should go to former State.
However, this is the lookout of the respective government and the taxpayer need not worry about it. The adjustments will be made by the Central and State Government and distribute the revenue amongst the States.
The next point is of input tax credit. GST has ensured that input tax credit which was paid on inputs and capital goods can be fully utilized by the taxpayer. However, the input tax credit of SGST cannot be cross utilized with CGST. SGST input tax credit can be utilized only against the liability of SGST tax and IGST tax.
Thus it is important to understand that SGST is a tax levied by the respective State government on the goods and services.