tax-guide 24 April 2026 · 6 min read

CGST vs SGST vs IGST — What's Different and When Each Applies (2026)

The only GST-split explainer Indian SMBs need. CGST + SGST for same-state, IGST for cross-state — with real invoice examples, rate math, and common mistakes.

If you just registered for GST, this is the first concept that trips you up. The rate is 18% on most things — but is it 18% CGST, or 9% CGST + 9% SGST, or 18% IGST? Get it wrong and your buyer can’t claim input tax credit, your GSTR-1 uploads but the portal flags mismatches, and you spend a Saturday fixing invoices.

This post answers:

What CGST, SGST, and IGST actually are
The simple rule for which one (or two) apply to each invoice
Three worked examples with real numbers
The #1 mistake Indian SMBs make
How billing software handles the split automatically

The 30-second answer

Same state (seller’s state = buyer’s state): CGST + SGST, each at half the total GST rate
Different state (seller in one state, buyer in another): IGST, at the full GST rate
Export / SEZ: usually zero-rated (separate topic)

That’s it. The total tax the buyer pays is the same either way — the difference is who (centre vs state) collects what. The government split GST this way so both central and state treasuries get their share.

The three taxes, precisely

CGST — Central Goods and Services Tax

Collected by the central government. Applies only to intra-state transactions (same state seller + buyer). Rate = half the applicable GST rate. Goes into the central exchequer.

SGST — State Goods and Services Tax

Collected by the state government. Applies only to intra-state transactions. Rate = half the applicable GST rate. Goes into the seller’s state treasury.

IGST — Integrated Goods and Services Tax

Collected by the central government as a single unified tax on inter-state transactions. Rate = full applicable GST rate. The centre later distributes the state’s share to the destination state.

There’s also UTGST (Union Territory GST) — same mechanism as SGST, but for UTs without a legislature (Chandigarh, Lakshadweep, Daman & Diu, Dadra & Nagar Haveli, Andaman & Nicobar, Ladakh). Treat it identically to SGST for billing purposes.

The rule — which one applies?

The rule is based on place of supply, not on where your buyer is physically located. Place of supply is:

For goods: the state where the buyer takes delivery
For services: usually the state where the buyer is based (if a B2B registered buyer) or where the service is consumed (if a B2C)

If your state = place of supply → CGST + SGST. If your state ≠ place of supply → IGST.

That’s the whole rule.

Worked example 1 — Intra-state goods sale

You’re a textile wholesaler in Maharashtra (state code 27). You sell ₹1,00,000 of cotton fabric to a retail shop also in Maharashtra.

Cotton fabric HSN 5208 → 5% GST.

Taxable value: ₹1,00,000
CGST @ 2.5% = ₹2,500
SGST @ 2.5% = ₹2,500
IGST: nothing
Invoice total: ₹1,05,000

Your buyer claims ITC of ₹2,500 CGST + ₹2,500 SGST against their own output GST. Clean.

Worked example 2 — Inter-state goods sale

Same textile wholesaler, same ₹1,00,000 cotton fabric, but now shipping to a buyer in Gujarat (state code 24).

Taxable value: ₹1,00,000
CGST: nothing
SGST: nothing
IGST @ 5% = ₹5,000
Invoice total: ₹1,05,000

Total tax is the same ₹5,000 — but labelled as one IGST line instead of two (CGST + SGST) lines. Your buyer in Gujarat claims ITC of ₹5,000 IGST against their output.

If you’d accidentally split this as CGST + SGST, the Gujarat buyer couldn’t claim it properly — their state treasury didn’t receive the SGST. You’d both end up reconciling for weeks.

Worked example 3 — Services invoice

You’re a consultant in Karnataka (state code 29). You bill ₹50,000 for a project to a client in Tamil Nadu (state code 33).

SAC 9983 — Consulting and professional services → 18% GST.

Taxable value: ₹50,000
CGST: nothing
SGST: nothing
IGST @ 18% = ₹9,000
Invoice total: ₹59,000

If the client were in Karnataka → ₹4,500 CGST + ₹4,500 SGST instead.

The #1 mistake Indian SMBs make

Getting place of supply wrong when selling to a customer’s branch in a different state.

Example: You’re in Maharashtra. Your customer is a company registered at a Gujarat HQ (GSTIN starts with 24…). But they asked you to ship the goods to their Maharashtra branch.

Place of supply = where goods are delivered = Maharashtra. Same as you. So it’s CGST + SGST, even though the buyer’s registered office is in Gujarat.

This is counterintuitive. You’d think “buyer is in Gujarat → IGST”. But place of supply follows the goods, not the buyer’s letterhead. Getting this right requires your billing tool to prompt you for place of supply separately from buyer GSTIN — our textile wholesaler walkthrough goes into this for B2B inter-state workflows.

Reverse charge — when this logic inverts

For some supplies, the buyer pays GST instead of the seller. These are reverse charge (RCM) transactions:

Goods Transport Agency (GTA) services
Legal services from an advocate
Services from an e-commerce operator
Imports

On a reverse-charge invoice, the seller shows 0 GST, and the buyer self-invoices to pay GST. Our legal services SAC page covers this in detail.

Your billing tool needs a reverse_charge flag per invoice so the GSTR-1 B2B table reports it correctly. (Ours does.)

How 21bill handles the split automatically

When you save an invoice in 21bill, these three pieces of data decide the tax split:

Your organisation’s state_code (e.g., 27 = Maharashtra — from settings)
The invoice’s place_of_supply (2-digit state code — set per invoice)
The product’s gst_rate (from the HSN master)

if org.state_code == invoice.place_of_supply:
    cgst_rate = gst_rate / 2
    sgst_rate = gst_rate / 2
    igst_rate = 0
else:
    cgst_rate = 0
    sgst_rate = 0
    igst_rate = gst_rate

You never type “CGST” or “SGST” or “IGST”. You just pick the customer, pick items, and the math happens. GSTR-1 exports with the right split per invoice row.

For services invoices where the SAC code is different from goods, the same logic applies — just different rates.

Common follow-up questions

Q: Does the ₹2 lakh B2C limit change anything? B2CS (B2C small) is invoices ≤ ₹2.5L to unregistered customers. These aggregate by state + rate in GSTR-1 — rather than one row per invoice. The CGST/SGST/IGST split logic stays identical.

Q: What about composition scheme? Composition dealers can’t charge GST on invoices — they pay a flat rate (1-6%) out of pocket. See our separate post on composition scheme billing.

Q: Cess? Some HSN codes attract compensation cess on top of GST (tobacco, luxury cars, aerated beverages). Cess is charged regardless of CGST/SGST/IGST split — it’s an additional line.

Q: Inter-state but buyer is unregistered? Still IGST at the full rate. Unregistered buyer doesn’t claim ITC (they’re not registered), but you still pay IGST and report it under B2CL if invoice > ₹2.5L.

Bottom line

Intra-state → CGST + SGST (split equally)
Inter-state → IGST (full rate as a single tax)
Place of supply drives the rule — not where the buyer’s letterhead says
Your billing tool should compute this, not you — manual calculation at ₹99/month of tool time saved is obviously the better deal

Related reading:

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