The Goods and Services Tax (GST) was introduced in India on 1st July 2017 to unify multiple indirect taxes into a single, comprehensive system. India follows a dual GST model, which is unique to its federal structure. This system ensures revenue-sharing between the Centre and States.
Meaning of Dual GST
Definition:
Dual GST refers to the structure in which both the Central Government and State Governments levy tax on a common tax base (i.e., supply of goods and services).
Legal Backing:
It is enabled through the 101st Constitutional Amendment Act, 2016, particularly Article 246A, which gives concurrent powers to both Centre and States to make laws on GST.
Types of GST Under the Dual System
| Type of GST | Levied By | Applicable When |
|---|---|---|
| CGST | Central Government | Intra-state supply of goods/services |
| SGST | State Government | Intra-state supply of goods/services |
| UTGST | Union Territory Govt. | Intra-UT supply in union territories |
| IGST | Central Government | Inter-state and international supply |
How Dual GST Works
a. Intra-State Supply
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Supply of goods/services within the same state
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Both CGST and SGST are levied
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Revenue is shared equally between Centre and State
Example:
If a good is sold in Karnataka for ₹1,000 and the GST rate is 18%,
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CGST = 9% = ₹90
-
SGST = 9% = ₹90
Total GST = ₹180
b. Inter-State Supply
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Supply from one state to another
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Only IGST is levied and collected by the Central Government
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Later, the Central Government distributes the State’s share
Example:
If a good is sold from Maharashtra to Gujarat for ₹1,000 and GST rate is 18%,
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IGST = 18% = ₹180
This ₹180 is collected by the Centre, and Gujarat (the destination state) receives its share.
Input Tax Credit (ITC) Flow in Dual GST
GST allows businesses to claim Input Tax Credit (ITC) on taxes paid at earlier stages to avoid tax cascading.
a. Credit Utilization Rules:
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IGST credit → Used for IGST, then CGST, then SGST
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CGST credit → Used for CGST, then IGST (not SGST)
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SGST credit → Used for SGST, then IGST (not CGST)
Note: Cross-utilization of CGST and SGST is not allowed.
Role of GSTN and GST Portal
The GST Network (GSTN) manages the IT infrastructure of GST.
Through the GST portal:
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Businesses register under both CGST and SGST using a single GSTIN
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Returns filed are split into CGST, SGST, and IGST sections
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ITC and tax payments are automatically calculated
Revenue Sharing Between Centre and States
Under dual GST, IGST collected by the Centre is apportioned between:
-
The Central Government
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The State Government where the goods/services are consumed
This ensures a destination-based tax system, promoting fair revenue distribution.
Advantages of Dual GST
| Feature | Benefit |
|---|---|
| Shared taxation powers | Respects federalism and empowers states |
| Common tax base | Avoids double taxation and overlaps |
| Clear ITC rules | Prevents cascading and promotes transparency |
| Unified process | Businesses file returns on a single online portal |
Conclusion
The dual GST model is a foundational aspect of India’s tax system, balancing the powers of the Centre and States. By dividing GST into CGST, SGST, and IGST, it creates a harmonized and transparent structure while maintaining constitutional balance.