WHAT IS IGST, CGST, AND SGST
Suppose goods worth INR 10,000 are sold by manufacturer A in Maharashtra to Dealer B in Maharashtra. B resells them to trader C in Rajasthan for INR 17,500. Trader C finally sells to End User D in Rajasthan for INR 30,000.
Suppose CGST= 9%, SGST=9%. Then, IGST= 9+9=18% Since A is selling this to B in Maharashtra itself, it is an intra-state sale and both CGST and SGST will apply, at the rate of 9% each.
B (Maharashtra) is selling to C (Rajasthan). Since it is an interstate sale, IGST at the rate of 18% will apply.
C (Rajasthan) is selling to D also in Rajasthan. Once again it is an intra-state sale and both CGST and SGST will apply, at the rate of 9% each.
*** Any IGST credit will first be applied to set off IGST then CGST. Balance will be applied to setoff SGST.
Since, GST is a consumption based tax, i.e., the state where the goods were consumed will collect GST. By that logic, Maharashtra (where goods were sold) should not get any taxes. Rajasthan and Central both should have got (30,000 * 9%) = 2,700 each instead of only 2,250.
Maharashtra (exporting state) will transfer to the Centre the credit of SGST of INR 900 used in payment of IGST. The Centre will transfer to Rajasthan (importing state) INR 450 as IGST credit used.
**Do note, that custom duties are not part of this tax structure.
