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Act 2017 Explained

SGST Act — State Goods and Services Tax

The State Goods and Services Tax Act 2017 is the law through which your state government collects GST on intra-state supplies. Here is how it works alongside CGST.

Introduction

The SGST Act is the state counterpart to the CGST Act. Every Indian state and union territory with a legislature passed its own SGST Act on 1 July 2017 when GST launched. The SGST Act governs the state's share of GST on goods and services supplied within that state.

On your tax invoice for an intra-state purchase, SGST appears as a separate line item alongside CGST. Both together make up the total GST. The state government uses SGST revenue for its budget priorities.

Key concepts

State-specific law

Every state and union territory enacted its own SGST Act. The centre enacted the UTGST for union territories without a legislature. The provisions are broadly identical across states.

Revenue goes to the state

SGST revenue belongs entirely to the state government where the supply takes place. This is different from the old VAT system, where the centre had no share of state VAT revenue.

Works with CGST

On every intra-state supply, the supplier charges both CGST and SGST. Both appear on the tax invoice. The buyer pays both, and both are eligible for input tax credit.

Inter-state is IGST

When goods or services cross a state border, SGST does not apply. Instead, IGST applies and the centre collects it, later distributing the state share to the destination state.

SGST vs UTGST

Territory type State GST law Administered by
State with legislature SGST Act (state) State tax department
Union territory without legislature UTGST (centre) CGST officer
States with legislature (J&K, Delhi, Puducherry) SGST Act State tax department

Frequently asked questions

What is SGST?
SGST stands for State Goods and Services Tax. It is the state counterpart to CGST. When you buy something within your own state, you pay both CGST (to the centre) and SGST (to your state government) on the same invoice.

How is SGST different from CGST?
Both apply to the same intra-state transaction. CGST revenue goes to the centre; SGST revenue goes to the state. The SGST Act in each state mirrors the CGST Act almost exactly — same definitions, same rules, same rates.

Do I pay SGST when buying from another state?
No. When you buy from a supplier in a different state, the transaction is inter-state and IGST applies instead of CGST + SGST. The IGST collected includes both the centre's and destination state's shares.

Can a business claim SGST as input tax credit?
Yes. A registered business can claim SGST paid on purchases as ITC and set it off against its SGST liability on sales. The CGST and SGST ITC can each only be used against the matching tax (CGST against CGST, SGST against SGST).

Which state's SGST applies in an online sale?
For e-commerce supplies, the SGST applies in the state where the goods are delivered. The e-commerce operator collects and pays GST on behalf of all sellers on the platform under the collected-at-source mechanism.

Sources

Last reviewed by FinWiz24 Research Desk.