CGST, SGST, and IGST Explained: Which Tax Applies to Your Invoice?

One of the most confusing aspects of GST for Indian businesses is knowing which tax to charge. Unlike the previous VAT regime where you dealt with one state-level tax, GST splits into three components: CGST, SGST, and IGST. Getting this wrong on your invoices means compliance headaches, ITC mismatches, and potential penalties.

The Three Components of GST

CGST — Central Goods and Services Tax

Collected by the Central Government. Applied on intra-state (within the same state) supplies. Rate is always half of the applicable GST rate.

SGST — State Goods and Services Tax

Collected by the State Government. Also applied on intra-state supplies, at the same rate as CGST. CGST and SGST are always charged together.

IGST — Integrated Goods and Services Tax

Collected by the Central Government and shared with the destination state. Applied on inter-state (different state) supplies, imports, and exports. Rate equals the full GST rate.

The Place of Supply Rule

The critical factor is the Place of Supply — where the goods are delivered or where the service is consumed:

The critical factor is the Place of Supply — where the goods are delivered or where the service is consumed:

Invoice Examples

Example 1: Intra-State (Same State)

A graphic designer in Bengaluru (Karnataka) invoices a client in Mysuru (Karnataka) for ₹50,000 of design services at 18% GST:

• Design services: ₹50,000
• CGST @ 9%: ₹4,500
• SGST @ 9%: ₹4,500
• Total: ₹59,000

Example 2: Inter-State (Different States)

The same designer invoices a client in Mumbai (Maharashtra):

• Design services: ₹50,000
• IGST @ 18%: ₹9,000
• Total: ₹59,000

The total amount is the same — only the tax split differs. But getting the split wrong causes ITC mismatches during GST return filing.

Common GST Rates by Service Type

Common GST Rates by Service Type — IT services, consulting, design: 18% — 9% CGST + 9% SGST.

HSN/SAC Codes: Why They Matter

Every item on your invoice needs an HSN code (for goods) or SAC code (for services).

Every item on your invoice needs an HSN code (for goods) or SAC code (for services). The required digit count depends on your turnover:

• Up to ₹5 crore — 4-digit HSN/SAC
• Above ₹5 crore — 6-digit HSN/SAC

Common SAC codes for freelancers and small businesses:

• 998314 — IT design and development services
• 998312 — IT consulting and support services
• 998361 — Advertising services
• 998399 — Other professional services
• 998214 — Accounting and auditing services

ITC Implications

Getting the tax component right is essential for Input Tax Credit:

Getting the tax component right is essential for Input Tax Credit:

• CGST paid can be used against CGST or IGST liability (not SGST)
• SGST paid can be used against SGST or IGST liability (not CGST)
• IGST paid can be used against IGST, then CGST, then SGST liability

Invoicemonk's free GST invoice generator automatically applies the correct tax split when you select INR currency. You can override rates per line item for mixed-rate invoices.