SGST (State Goods and Services Tax) is an important component of India’s dual GST structure and has a direct impact on intra-state trade. Whether you are a business owner, accountant, or finance student, knowing SGST is critical for tax compliance and strategic decision-making. In this post, we’ll look at 7 must-know facts about SGST, including its benefits, problems, and compliance requirements.
Types of GST in India
- CGST: Central Goods and Services Tax
- SGST: State Goods and Services Tax
- UTGST: Union Territory Goods and Services Tax and
- IGST: Integrated Goods and Services Tax
What is SGST?
SGST (State Goods and Services Tax) is a part of India’s GST system, introduced in 2017. It is levied by the State Government on intra-state (within the same state) transactions of goods and services.
Key Features of SGST:
✅ Collected by the State Government
✅ Applicable on supply of goods and services within a state
✅ Shared with CGST (Central GST) in intra-state sales
✅ Replaced state taxes like VAT, Entertainment Tax, etc.
🔹 Example: If a Bengaluru-based retailer sells goods worth ₹10,000 to a customer in Bengaluru, SGST and CGST will apply.
How Does SGST Work?
Under GST, intra-state transactions are taxed under SGST + CGST, while inter-state transactions fall under IGST.
SGST Flow Example:
- A Chennai supplier sells a product for ₹50,000 to a Chennai buyer.
- GST rate = 12% (6% SGST + 6% CGST).
- Total GST = ₹6,000 (₹3,000 SGST + ₹3,000 CGST).
The Tamil Nadu Govt. gets ₹3,000 (SGST) and the Central Govt. gets ₹3,000 (CGST).
Difference Between SGST, CGST, and IGST
| Tax Type | Collected By | Applicable When | Example |
| SGST | State Govt. | Intra-State Sale | Sale within Kerala |
| CGST | Central Govt. | Intra-State Sale | Sale within Gujarat |
| IGST | Central Govt. | Intra-State Sale | Sale from Punjab to Odisha |
🔹 Example:
Intra-State Sale (SGST + CGST):
- Product price: ₹30,000
- GST: 5% (2.5% SGST + 2.5% CGST)
- Total tax: ₹1,500 (₹750 SGST + ₹750 CGST)
Inter-State Sale (IGST):
- Product price: ₹30,000
- IGST: 5%
- Total tax: ₹1,500 (fully to Central Govt.)
Who Needs to Pay SGST?
✅ Businesses with annual turnover above ₹40 lakhs (₹20 lakhs for some states)
✅ E-commerce sellers
✅ Service providers (like consultants, restaurants)
⚠️ Exemptions:
- Small businesses under Composition Scheme
- Essential goods like unpacked food, education services
SGST Rates and Examples
SGST rates are the same as CGST (half of the total GST rate).
| Category | SGST Rate | Total GST (SGST+CGST/IGST) | Example Products |
| 0% | 0% | 0% | Rice, Wheat, Curd |
| 5% | 2.5% | 5% | Footwear (< ₹1,000), Coal |
| 12% | 6% | 12% | Butter, Packed Coconut Water |
| 18% | 9% | 18% | Hair Oil, Restaurants (AC) |
| 28% | 14% | 28% | Luxury Goods, Cigarettes |
🔹 Example:
- Restaurant Bill (AC): ₹2,000
- GST: 18% (9% SGST + 9% CGST)
- Tax Amount: ₹360 (₹180 SGST + ₹180 CGST)
- Final Bill: ₹2,360
How to Calculate SGST?
Formula:
text
SGST Amount = (Price × SGST Rate) / 100
Total GST = SGST + CGST (for intra-state)
🔹 Example Calculation:
- Product Price: ₹25,000
- GST Slab: 12% (6% SGST + 6% CGST)
- SGST: ₹1,500 (6% of ₹25,000)
- CGST: ₹1,500
- Total Tax: ₹3,000
- Final Invoice Amount: ₹28,000
Input Tax Credit (ITC) Under SGST
Businesses can claim credit for SGST paid on purchases.
🔹 Example:
- Business X buys goods for ₹1,00,000 + ₹12,000 GST (6% SGST + 6% CGST)
- Sells finished goods for ₹1,50,000 + ₹18,000 GST
- Tax Payable: ₹18,000 GST
- ITC Claimed: ₹12,000 (from purchase)
- Net Tax Paid: ₹6,000
✅ Conditions for ITC:
- Must have a valid GST invoice
- Supplier must have filed returns
Input Tax Credit (ITC) in SGST
Businesses can claim ITC (Input Tax Credit) on SGST paid, but it can only be used in the following order:
- Against SGST liability.
- Against IGST liability (only if SGST credit is remaining).
- Cannot be used to pay CGST liability.
Benefits of SGST
- Simplifies state-level tax compliance.
- Enables transparent tax sharing between Centre and States.
- Promotes ease of doing business within states.
- Reduces tax cascading by allowing ITC.
Filing SGST Returns
Same as CGST filings:
- GSTR-1 (Sales)
- GSTR-3B (Tax Payment)
- GSTR-9 (Annual Return)
⚠️ Late Fees: ₹50/day (₹20 for nil returns)
Conclusion
SGST ensures state governments get revenue while simplifying tax compliance. By understanding rates, ITC, and filing, businesses can avoid penalties and save money.
📌 Pro Tip: Use GST software for easy return filing!
🔗 Share this guide to help others understand SGST! 📢
FAQs
Who collects SGST?
SGST is collected by the State Government for transactions within that state.
Can SGST be used to pay IGST?
Yes, but only after exhausting SGST liability.
How does SGST affect consumers?
SGST is included in the final price, so consumers indirectly bear the cost.
Is SGST applicable on inter-state sales?
No, inter-state sales are taxed under IGST, not SGST.
