How GST Works in India: CGST, SGST, IGST Explained
Under the Indian dual GST framework, intra-state transactions split tax equally between CGST and SGST, while inter-state transactions apply IGST.
1. The Dual GST Architecture
India implemented GST under the 101st Constitutional Amendment Act. When a transaction occurs within the same state (Intra-state), the total GST rate is divided exactly 50/50 between the Central Government (CGST) and the State Government (SGST).
When goods or services cross state boundaries (Inter-state), the full rate is collected as Integrated GST (IGST) by the Centre and subsequently apportioned.
2. Reverse GST Extraction Math
When a consumer purchases an item with a tax-inclusive MRP of ₹1,180 at 18% GST, extracting the pre-tax base amount requires reverse calculation:
Base Amount = Gross Price ÷ (1 + (Rate / 100))
For ₹1,180 at 18%: Base = 1,180 ÷ 1.18 = ₹1,000. Total GST = ₹180 (CGST ₹90, SGST ₹90).