Explain CGST, SGST and IGST. When does each apply?

What the interviewer wants to hear

• GST is a destination-based tax on supply of goods and services
• Intra-state supply attracts CGST plus SGST (or UTGST), split equally
• Inter-state supply and imports attract IGST
• Place of supply decides intra-state or inter-state
• Input tax credit can be used against output tax

Model answer

GST is charged on the supply of goods and services, and the type depends on whether the supply is within one state or across states. If the supplier and the place of supply are in the same state, it is an intra-state supply and the rate is split equally into CGST, which goes to the Centre, and SGST, which goes to that state. In a union territory without a legislature, UTGST replaces SGST. If they are in different states, or for imports, it is an inter-state supply and IGST is charged at the full rate; the Centre then settles the state share. For example, an 18% sale within Karnataka is 9% CGST plus 9% SGST, while the same sale from Karnataka to Kerala is 18% IGST. Registered buyers can claim input tax credit, following set rules on which credit can be used against which liability.

More easy Accountant questions

• Explain double-entry bookkeeping to someone new, using a simple example.
• What is the difference between cash basis and accrual basis accounting, and why do companies use accrual?
• Walk me through how you prepare a bank reconciliation statement.
• How does a transaction travel from a source document all the way to the financial statements?
• What is depreciation and why do businesses charge it?
• Explain input tax credit under GST with a simple example.
• What is the difference between a provision and a reserve?
• How would you handle a weekly vendor payment run?
• Name the main financial statements and explain how they are linked.