CGST vs SGST vs IGST Explained Simply

CGST and SGST get charged together, split evenly, when you sell to a customer inside your own state. IGST steps in instead, as one combined rate, when the sale crosses a state border, or falls into one of the specific categories GST law treats as inter-state, exports and supply to a special economic zone being the obvious examples. The total tax rate is usually identical either way. What changes is who the money goes to and how it's split on the invoice.

Why does GST split the tax into three types at all?

India runs a dual GST system because both the central government and the state governments need a share of consumption tax revenue, and the constitution doesn't let one government collect tax on behalf of another without a mechanism for it. So for a sale that happens entirely within one state, the tax splits down the middle: half to the centre as CGST, half to the state as SGST. For a sale that crosses a state line, splitting it the same way would be a mess to administer and settle between two state governments, so instead the seller charges one combined tax, IGST, and the central government handles apportioning the state's share afterward.

In union territories without their own legislature, SGST gets replaced by UTGST, which works the same way in practice.

How do I know if a sale is intra-state or inter-state?

It comes down to two addresses: the supplier's location and the place of supply, and that's not always the same as the buyer's billing address. For most straightforward goods sales, place of supply is where the goods get delivered. For services, it's usually the recipient's location, though there are exceptions for categories like real estate or event-based services, where the place of supply follows the property or the event itself. Registered in Maharashtra and delivering to a customer in Maharashtra? That's intra-state, CGST plus SGST. Deliver the same goods to a customer in Karnataka, and it's inter-state, IGST.

This is exactly why place of supply is one of the mandatory fields on a GST invoice. It isn't paperwork for its own sake. It's the field that decides which tax type you're legally required to charge.

A quick example

Say you run a small manufacturing unit in Pune and sell a batch of machine parts worth ₹50,000, taxed at 18%.

• Buyer also in Maharashtra: you charge ₹4,500 CGST and ₹4,500 SGST, ₹9,000 total tax.
• Buyer in Gujarat: you charge ₹9,000 IGST in one line. Same total tax, different split.

Notice the customer's total tax burden doesn't change. What changes is purely how the tax gets labelled and routed on the back end.

The same logic for a service business

Say you run a design consultancy registered in Pune and finish a project for a client whose office, and the place of supply for that service, is also in Maharashtra. You invoice ₹1,00,000 at 18%: ₹9,000 CGST and ₹9,000 SGST. If your client's place of supply is Tamil Nadu instead, you invoice the same ₹1,00,000 at 18% IGST, ₹18,000 on a single line. The service and its price haven't changed. Only the state on the other end of the transaction has.

How should CGST, SGST and IGST appear on the invoice itself?

As separate line items, each with its own rate and amount, never folded into one "tax" or "GST" figure. An intra-state sale needs two lines: CGST with its rate and amount, SGST with its rate and amount. An inter-state sale needs one line for IGST. This isn't cosmetic. It's what lets your buyer's accounting system correctly claim input credit against the right head of tax, and it's what a GST officer expects to see during any review.

What happens if I charge the wrong type?

This happens more often than it should, especially with businesses that ship across states but default to CGST plus SGST out of habit, or the other way round. Charging IGST on what should've been an intra-state sale, or splitting CGST plus SGST on what should've been inter-state, is a genuine compliance error. It usually doesn't change what the customer pays, but it can create problems when your GST returns get reconciled, and if your buyer is GST-registered, a misclassified invoice can complicate their input tax credit claim. It's one of the errors we walk through in our roundup of common GST invoicing mistakes, and getting flagged for it repeatedly is exactly the kind of thing that draws unwanted attention during a GST audit.

Does the rate itself change between CGST+SGST and IGST?

No. A product or service taxed at 18% under GST stays 18% whether you're charging CGST plus SGST (9% plus 9%) or IGST (18% on one line). The rate sits at the item level, set by its HSN or SAC classification, independent of where the buyer is. Place of supply only changes the split. It never touches the total percentage.

What about exports?

Exports of goods and services are generally treated as inter-state supply and typically fall under specific rules, including the option to supply under bond or LUT without paying IGST upfront, or paying IGST and claiming a refund. The exact mechanics and eligibility depend on rules worth confirming directly on the GST portal or with a CA before you invoice your first export order, since getting this wrong carries bigger consequences than a routine domestic misclassification.

What about the reverse charge mechanism?

Under reverse charge, the liability to pay GST shifts from the supplier to the recipient for specific notified categories of goods or services, certain supplies from an unregistered dealer to a registered one, for example, or particular services the government has notified separately. The CGST/SGST versus IGST logic still applies the same way, based on place of supply, but it's the buyer, not the seller, who deposits the tax with the government. You can check which categories are currently notified through the Central Board of Indirect Taxes and Customs. If reverse charge applies to a transaction, the invoice needs to say so clearly, one of the mandatory fields we cover in our guide to the GST invoice format.

Does this apply if I'm registered under the composition scheme?

Not in the same way. Composition scheme taxpayers pay GST as a flat percentage of turnover directly to the government, rather than charging CGST, SGST, or IGST separately on each invoice. If you're on the composition scheme, you generally issue a bill of supply instead of a tax invoice, with no tax breakup shown to the buyer at all. That's a genuinely different mechanism from the standard CGST/SGST/IGST split covered here, so if you're weighing the composition scheme, know that its invoicing rules aren't just a simpler version of the same thing.

Making this automatic instead of manual

In practice, nobody wants to look up their customer's state on every single invoice and manually decide CGST plus SGST versus IGST. It's the kind of decision that's easy to get right in your head and still get wrong at the last minute, rushing to send an invoice before a client's payment cycle closes. If you'd rather not do this by hand, tools like Settle work it out automatically: you enter the place of supply, and the invoice generates with the correct CGST/SGST or IGST split calculated for you, every time. And once that part's automated, creating the invoice itself barely takes any time at all, something we get into in our guide on building a compliant invoice in under a minute.

Frequently asked questions