India's dual GST model means taxes are administered by both the Central and State governments. For business owners, knowing when to charge CGST & SGST versus IGST is the most critical part of generating a compliant tax invoice.
The Three Types of GST Explained
1. CGST (Central Goods and Services Tax)
This is the tax collected by the Central Government on intra-state transactions (sales happening within the boundaries of a single state). It is always accompanied by SGST. The revenue goes to the Center.
2. SGST (State Goods and Services Tax)
This is the tax collected by the State Government on intra-state transactions. It is always accompanied by CGST. The revenue goes to the State where the sale happens.
3. IGST (Integrated Goods and Services Tax)
This tax is collected by the Central Government on inter-state transactions (sales between two different states, or imports/exports). The Center later distributes the state's share. IGST is applied alone, not with CGST/SGST.
The Golden Rule: Place of Supply
How do you decide which tax to apply? It all comes down to the Place of Supply.
- If Supplier State = Buyer State: Charge CGST + SGST (Intra-state)
- If Supplier State ≠ Buyer State: Charge IGST (Inter-state)
Calculation Examples
Scenario A: Intra-State Sale (Same State)
A business in Maharashtra sells laptops worth ₹50,000 to a customer in Maharashtra. The GST rate for laptops is 18%.
| Taxable Value | ₹ 50,000 |
| CGST (9%) | ₹ 4,500 |
| SGST (9%) | ₹ 4,500 |
| Total Invoice Value | ₹ 59,000 |
Scenario B: Inter-State Sale (Different States)
A business in Maharashtra sells the same laptops worth ₹50,000 to a customer in Karnataka. The GST rate is 18%.
| Taxable Value | ₹ 50,000 |
| IGST (18%) | ₹ 9,000 |
| Total Invoice Value | ₹ 59,000 |
How to handle this in our Free Invoice Generator?
When you use the Business Invoice Generator, you simply select the tax type (CGST & SGST or IGST) based on your customer's location, and enter the total GST percentage (e.g., 18%). The tool automatically splits the 18% into 9% CGST and 9% SGST for intra-state transactions, ensuring your invoice is perfectly formatted without manual math.