Day 19: GST Basics – CGST, SGST, IGST & ITC
✅ Today you will learn
- Why GST has CGST, SGST and IGST
- GST 2.0 slabs from 22 September 2025
- Intra-state vs inter-state supply (place of supply)
- Input tax credit (ITC) and its conditions
- The legal order of ITC set-off
🏢 In the real world
From June 2026, Rohit Stationers registers under GST because a school chain and a Delhi distributor want proper tax invoices. Before touching TallyPrime’s GST screens, an accountant must be able to work out the tax on paper: which tax, how much, and how much cash finally goes to the government.
GST in one picture
| Type of supply | Tax charged | Who gets it | Example from Aligarh (UP) |
|---|---|---|---|
| Intra-state (same state) | CGST + SGST (half each) | Centre + state | Sale to a school in Agra |
| Inter-state (other state) | IGST (full rate) | Centre, shared with destination state | Sale to a dealer in Delhi |
| Union territory without legislature | CGST + UTGST | Centre + UT | Sale within Chandigarh |
GST 2.0 rate slabs (from 22 September 2025)
| Slab | Typical goods/services |
|---|---|
| Nil / exempt | Fresh food, exercise books and notebooks, education, healthcare services |
| 5% (merit rate) | Many daily-use and essential goods |
| 18% (standard rate) | Most goods and services – the default slab |
| 40% (special rate) | Luxury and sin goods such as tobacco products and pan masala, aerated sugary drinks, large cars |
| Special rates | 3% gold/silver, 0.25% rough diamonds |
The old 12% and 28% slabs were folded into 5%, 18% and 40% from 22-09-2025, and rates still change through notifications. Check the current rate for each HSN/SAC on the CBIC GST rate finder before setting it in TallyPrime. Rates used in this course are for learning.
Key terms
- Registration: needed when aggregate turnover crosses the threshold (generally ₹40 lakh for goods, ₹20 lakh for services; lower in special-category states), or always for inter-state supply of goods and e-commerce sellers.
- ITC conditions: tax invoice in hand, goods/services received, supplier has filed the invoice so it appears in your GSTR-2B, and supplier has paid the tax. Blocked credits (e.g. food, personal use) are not allowed.
The set-off order
- IGST credit is used first – against IGST, then against CGST and/or SGST.
- CGST credit – against CGST, then IGST. Never against SGST.
- SGST credit – against SGST, then IGST. Never against CGST.
- Whatever liability remains is paid in cash (electronic cash ledger); unused credit carries forward.
Example: output tax CGST ₹45,000, SGST ₹45,000, IGST ₹30,000; ITC CGST ₹20,000, SGST ₹20,000, IGST ₹50,000.
| Tax | Output tax | ITC available | Pay in cash | Credit carried forward |
|---|---|---|---|---|
| IGST | 30,000 | 50,000 | 0 | 0 |
| CGST | 45,000 | 20,000 | 5,000 | 0 |
| SGST | 45,000 | 20,000 | 25,000 | 0 |
| Total | 1,20,000 | 90,000 | 30,000 | 0 |
| Credit used | Against liability | ₹ |
|---|---|---|
| IGST credit | against IGST | 30,000 |
| IGST credit | against CGST | 20,000 |
| CGST credit | against CGST | 20,000 |
| SGST credit | against SGST | 20,000 |
Total cash payable ₹30,000. The ₹20,000 of IGST credit left after IGST can be split between CGST and SGST in any proportion – the total cash stays ₹30,000.
Solved examples
Example 1: Which tax and how much?
| Supply | Taxable (₹) | Rate | CGST | SGST | IGST | Invoice total |
|---|---|---|---|---|---|---|
| Sale within UP, ₹50,000 @ 18% | 50,000 | 18% | 4,500 | 4,500 | – | 59,000 |
| Sale from UP to Rajasthan, ₹50,000 @ 18% | 50,000 | 18% | – | – | 9,000 | 59,000 |
| Sale within UP, ₹20,000 @ 5% | 20,000 | 5% | 500 | 500 | – | 21,000 |
Practice exercises (unsolved – answer hidden)
Try each exercise on paper or in TallyPrime first, then open the answer to check.
🏋️ Practice – do it yourself
Show solution
Steps: IGST → IGST ₹12,000; IGST → CGST ₹12,000; IGST → SGST ₹1,000; CGST → CGST ₹6,000; SGST → SGST ₹9,000. Cash: CGST ₹0, SGST ₹8,000, IGST ₹0 = ₹8,000. CGST had only ₹6,000 of its own credit, so IGST credit went there first; putting all IGST credit on CGST would leave ₹1,000 of CGST credit idle and raise cash to ₹9,000.Show solution
(a) Intra-state: CGST ₹3,600 + SGST ₹3,600; invoice ₹47,200. (b) Inter-state: IGST ₹7,200; invoice ₹47,200.Show solution
No. CGST and SGST cannot be cross-utilised. The SGST is paid in cash (or from SGST/IGST credit) and the CGST credit is used against CGST/IGST or carried forward.🏅 Job skills unlocked today
Quick quiz
🧠 Quick Quiz – test yourself
Interview corner
💼 Interview Corner
Explain the ITC set-off order.
IGST credit first against IGST, then CGST/SGST; CGST credit against CGST then IGST; SGST credit against SGST then IGST. CGST and SGST cannot be cross-utilised; the balance is paid from the cash ledger.
When can you claim ITC?
When you hold a valid tax invoice, have received the goods/services, the invoice appears in GSTR-2B (supplier has filed), tax is paid by the supplier and the credit is not blocked.
Summary
- Intra-state: CGST + SGST; inter-state: IGST.
- GST 2.0 slabs: 5%, 18%, 40% (plus nil and special rates) from 22-09-2025.
- ITC needs invoice, receipt of goods, GSTR-2B match and tax paid by supplier.
- Set-off: IGST credit first; CGST and SGST never cross.
Day 20: switch on GST in TallyPrime – company GSTIN, tax ledgers, HSN and rates on items and parties.
Frequently Asked Questions
Is GST charged on exempt items like notebooks?
Where can I check the latest GST rate of an item?
Tally and TallyPrime are trademarks of Tally Solutions Pvt. Ltd. This is an independent course, not affiliated with or endorsed by Tally Solutions. All business names, GSTINs and figures in the examples are fictional samples.
