CGST (Central Goods and Service Tax) - Meaning & Rates Slab

Introduction

The Central Goods and Services Tax (CGST) is one of the main parts of the Goods and Services Tax (GST) system in India. It was introduced on July 1, 2017, to bring all indirect taxes under one roof. CGST is collected by the Central Government on all intra-state (within the same state) sales of goods and services. It helps ensure that taxpayers don’t have to pay multiple taxes on the same product or service. This article explains what CGST is, its features, applicability, rates, and objectives for the Financial Year 2025-26, in a simple way for better understanding.

What is CGST?

The Central Goods and Services Tax (CGST) is a tax levied by the Central Government on the supply of goods and services within a single state. It replaced earlier central taxes like Excise Duty, Service Tax, and Countervailing Duty (CVD).

For example, when a business sells a product within Maharashtra, both CGST and SGST (State GST) are charged. The central government collects CGST, while the state government collects SGST.

Key points:

• Collected by: Central Government.
• Applicable on: Sale of goods or services within a state.
• Introduced: In 2017 under the CGST Act, 2017.
• Purpose: To remove the burden of multiple indirect taxes and simplify the tax structure.

Further read: GST rates in 2025: List of Goods and Services Tax Rates slabs

Understanding CGST Act

The CGST Act, 2017 lays down the rules, processes, and guidelines for collecting and managing the Central Goods and Services Tax. It defines how CGST is applied, how taxpayers must register, and how tax credits (ITC) can be claimed.

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Main points under the CGST Act:

• Defines intra-state transactions where CGST and SGST apply.
• Explains tax payment procedures, returns filing, and refund processes.
• Describes input tax credit (ITC) rules to avoid double taxation.
• Sets penalties for non-compliance or delayed filing.

The Act ensures uniform taxation across all states and makes the system more transparent and efficient.

Objectives of the CGST Act, 2017

The main objectives of the CGST Act are:

1. To simplify taxation – Replace multiple central taxes with one uniform tax.
2. To promote transparency – Prevent tax evasion by creating a unified system.
3. To encourage business growth – Make compliance easier for small and large businesses.
4. To boost the economy – Increase efficiency in tax collection and revenue sharing between the centre and states.
5. To avoid double taxation – Ensure tax is charged only once on the final value of goods and services.

When is CGST Applicable?

CGST is applicable when a sale or service happens within the same state. For example, if a shop in Mumbai sells goods to a customer in Pune, both CGST and SGST are applied.

CGST applies in cases like:

• Selling goods or services within a state.
• Online sales are made to customers in the same state.
• Business-to-business (B2B) and Business-to-consumer (B2C) transactions within the same state.

However, if goods are sold to another state, IGST (Integrated GST) is charged instead.

Imagine a manufacturer of toys in Pune, Maharashtra, sells toys to a shopkeeper, who is also in Pune, Maharashtra. This is an intra-state sale, so both CGST and SGST will apply.

Details of Sale

Amount (in Rupees)

Price of the toys (Taxable Value)

₹10,000

Applicable GST Rate on Toys

12%

Since the GST rate is 12% and the sale is within the same state, this 12% is split equally:

• CGST Rate = 6%
• SGST Rate = 6%

Calculation of CGST and SGST:

• CGST Amount: 6% of ₹10,000 = 6/100 * 10,000 = ₹600
• SGST Amount: 6% of ₹10,000 = 6/100  *10,000 = ₹600
• Total GST: ₹600 (CGST) + ₹600 (SGST) = ₹1,200
• Final Bill Amount: ₹10,000 (Price) + ₹1,200 (Total GST) = ₹11,200

Who gets the money?

• The manufacturer collects ₹1,200 from the shopkeeper.
• The manufacturer gives the CGST part (₹600) to the Central Government.
• The manufacturer gives the SGST part (₹600) to the Maharashtra State Government.

Features of the CGST Act, 2017

1. Uniform Taxation: Same CGST rate applies across all states.
2. Dual Tax Structure: Both CGST and SGST are levied on intra-state supplies.
3. ITC Benefit: Allows Input Tax Credit on purchases to reduce tax liability.
4. Single Registration: One registration under GST covers CGST compliance.
5. Digital Filing: Returns and payments are made online via the GST portal.
6. Transparency: Encourages a paperless and corruption-free system.

CGST Rules and How CGST ITC is Set Off

Type of Input Tax Credit (ITC)

Can be used to pay CGST

Can be used to pay SGST

Can be used to pay IGST

CGST ITC

✅ Yes

❌ No

✅ Yes

SGST ITC

❌ No

✅ Yes

✅ Yes

IGST ITC

✅ Yes

✅ Yes

✅ Yes

Key Rule:

• CGST credit is used first to pay CGST, and then IGST (if any balance remains).
• It cannot be used to pay SGST.

CGST Slab Rates

GST Rate

Types of Goods and Services

0%

Essential items like fresh fruits, vegetables, and milk.

5%

Basic goods such as tea, coffee, medicines, and footwear. Commonly used essentials

12%

Processed food, mobile phones, and packaged foods.

18%

Standard rate for most goods & services, electronic goods, and home appliances.

28%

Luxury goods like cars, air conditioners, and tobacco.

These rates are uniform across India and apply to both CGST and SGST components for intra-state sales.

Benefits of the Central Goods and Services Tax

1. Simplifies taxation: Combines multiple taxes into one.
2. Reduces cost: Avoids double taxation and lowers the overall tax burden.
3. Improves compliance: Single online filing for all GST-related taxes.
4. Promotes transparency: Easier tracking of tax payments and refunds.
5. Encourages business growth: Smooth interstate and intrastate operations under one tax system.

What is the Formula of CGST?

The formula for CGST calculation is:

👉 CGST = (Value of Goods or Services × CGST Rate) / 100

Example:

If the value of goods = ₹5,000 and CGST rate = 9%,
then CGST = (5,000 × 9) / 100 = ₹450.

So, you will pay ₹450 as CGST on a ₹5,000 product or service.

Documents Required for CGST Registration

To register under GST and collect CGST, you need:

1. PAN Card of the business or owner.
2. Aadhaar Card of the applicant.
3. Proof of business address (rent agreement or electricity bill).
4. Bank account details (cancelled cheque or bank statement).
5. Photographs of the owner or partners.
6. Business registration certificate or partnership deed.

These documents must be uploaded on the GST Portal for approval.

Why Are There Three Categories in GST?

The GST system in India has three categories to ensure a fair share of tax revenue between the Central and State Governments:

1. CGST (Central GST): Collected by the Central Government for intra-state sales.
2. SGST (State GST): Collected by the State Government for intra-state sales.
3. IGST (Integrated GST): Collected by the Central Government for inter-state sales and shared later with states.

This dual system ensures both governments receive revenue and taxpayers have a unified process across the country.

Conclusion

The Central Goods and Services Tax (CGST) is an essential part of India’s GST structure. It ensures simplified taxation, eliminates double taxation, and promotes business transparency. For FY 2025-26, the CGST slab rates remain between 0% to 28%, depending on the type of goods or services. Understanding CGST helps both individuals and businesses file taxes correctly, claim input credits, and stay compliant with tax laws.