SGST Full Form & Meaning: Everything You Must Know About State GST

The SGST full form is State Goods and Services Tax. It refers to the tax collected by state governments on intra-state supplies of goods and services. SGST is part of the dual Goods and Services Tax (GST) framework structure implemented in India from 1 July 2017. When a transaction occurs within a single state, the tax is split between the Centre and the State as CGST and SGST, respectively.

This article explains what is SGST, how it works, and its role in supporting state-level revenue under India’s GST framework.

What is SGST?

The full form of SGST is State Goods and Services Tax. State governments in India are responsible for managing essential civic infrastructure, including health, local governance, law and order, and agriculture. They also carry out key developmental activities. These responsibilities require considerable fiscal autonomy, funded through tax and non-tax revenues. SGST is a major source of tax revenue for state governments.

The GST Act 2017 allows individual state governments to levy and collect SGST from ‘intra-state’ supply transactions. Like SGST, the GST Act also enables union territories (UTs) to levy and collect GST on intra-UT supply transactions. However, this portion of GST is termed as UTGST.

Here, the ‘intra-state’ supply means any supply transaction within the geographical boundary of a single state or a union territory. Also, both the seller and buyer involved in that transaction must be located within the same state or UT.

The GST Act mandates Goods and Services Tax on any transaction equally between Central GST and State GST.

GST = CGST + SGST (or UTGST)

Example:

Suppose an electronics store in Chennai sells a laptop to a customer in Sriperumbudur. Since both parties are in Tamil Nadu, it’s an intra-state transaction. If the GST rate is 18%, the tax is split equally between CGST and SGST, which is 9% each. If the seller and buyer were in a UT like Puducherry, UTGST would apply instead of SGST.

What are the key aspects of State GST?

Being a vital part of India’s tax federalism, here are the important aspects of SGST:

• Administration: State governments collect SGST on intra-state transactions, each with its own GST authority. However, SGST operates within a dual-tax structure in coordination with the Central GST. Both are administered through the GSTN (Goods and Services Tax Network), a web-based platform for registration, tax filing, payment, return submission, and more.

• Levying of taxes and collection: As per the CGST Act, 2017, the state government is responsible for levying and collecting SGST on intra-state supplies.

• Input Tax Credit (ITC): A key feature of GST is the ability to claim credits on taxes already paid. Businesses can claim ITC on SGST paid for business-to-business transactions. However, no credit is allowed for personal (business-to-consumer) purchases.

• Rates: The current GST slabs are 0% (nil), 5%, 12%, 18% and 28%. For intra-state supplies, these rates are equally split between CGST and SGST. So, the SGST components are 2.5%, 6%, 9% and 14% respectively.

• Compliance responsibility: All GST-registered taxpayers must comply with the provisions of the SGST Act, 2017.

How does the SGST work?

Let’s revisit the earlier example with additional details.

An electronics retailer, ABC Ltd, based in Chennai, sells a laptop to Mrs Senthil in Sriperumbudur.

• ABC Ltd sold a laptop to a Sriperumbudur-based customer.
• The sale price of the laptop is ₹50,000, excluding GST.
• The applicable GST rate on laptop computers is 18%.
• ABC Ltd charged 18% GST on the sale price and collected the total sum of (₹50,000*18%) or ₹9,000 as tax.
• The actual price that Mrs Senthil paid is (₹50,000+₹9,000) or ₹59,000.
• Out of 18%, the applicable CGST is 9% (half of 18%). So, the portion of SGST out of the total GST collected will be (half of ₹9,000) or ₹4,500.

Now, the question is how much SGST will ABC Ltd remit as SGST? The answer depends on how much GST the retail store (ABC Ltd) has already paid while sourcing the laptop. ABC Ltd did not manufacture the laptop. It bought it from a wholesaler based in Chennai.

Assume ABC bought it at a sales price of ₹45,000 (excluding GST).

• The purchase price of the laptop for ABC is ₹45,000.
• The retailer paid GST at the rate of 18%. The total GST paid was (₹45,000*18%) or ₹8,100.
• The total GST of ₹8,100 paid by ABC Ltd would be apportioned equally between CGST and SGST.
• The SGST component would be worth ₹4,050 (half of ₹8,100).

So, ABC Ltd (the electronics retailer) has already paid ₹4,050 as SGST while purchasing the laptop it later sold to Mrs Senthil. The retailer can claim a tax credit of ₹4,050 out of the ₹4,500 collected from Mrs Senthil as SGST.

• The final value of SGST that ABC Ltd would remit to the GST collection account of the State Government of Tamil Nadu is (₹4,500 - ₹4,050) or ₹450.

Conclusion

India’s federal governance system distributes powers between the Centre and the states. What is SGST, and why is it important? SGST, or State Goods and Services Tax, represents the fiscal embodiment of this principle within the GST framework. By enabling states to retain their share of indirect taxes, SGST plays a vital role in ensuring financial autonomy and supporting the delivery of public services at the state level.