CGST, SGST, and IGST Explained: How GST Tax Splits Work on an Invoice

Every GST-registered business in India has to decide, on every single invoice, whether to charge CGST + SGST or IGST. Get it wrong and the invoice is still "correct" in the sense that the total tax amount matches — but your customer may not be able to claim input tax credit on it, which is the kind of mistake that surfaces months later as an awkward phone call, not an immediate error.

This guide explains what each tax actually is, exactly how the split is decided, and the one rule that causes almost every real-world mistake.

What CGST, SGST, and IGST actually are

GST is a single tax, but it's collected as two separate components depending on where the transaction happens:

• CGST (Central GST) — collected by the central government.
• SGST (State GST) — collected by the state government where the supply takes place.
• IGST (Integrated GST) — a single tax collected by the central government (and later apportioned to the destination state), used instead of CGST+SGST whenever a supply crosses state lines.

The important thing to internalise: CGST+SGST and IGST are not two different tax rates. For any given good or service, the combined CGST+SGST rate is always equal to the IGST rate. An 18% GST item is either 9% CGST + 9% SGST, or 18% IGST — never both, and never a different total either way.

The rule that decides which one applies

The decision comes down to one question: is the "place of supply" in the same state as the supplier's registered location, or a different one?

Scenario	Tax charged
Supplier and place of supply are in the same state (intra-state)	CGST + SGST
Supplier and place of supply are in different states (inter-state)	IGST
Export of goods or services, or supply to a SEZ unit	IGST (typically zero-rated, subject to conditions)

For most straightforward B2B services, the place of supply is simply the location of the recipient (your customer's registered address / GSTIN state). For goods, it's usually where the goods are delivered. There are specific exceptions in the GST law for things like real estate, transport, and event-based services — but for the vast majority of invoices a typical small business issues, "which state is my customer's GSTIN registered in" is the deciding question.

A worked example

Say you run a design studio registered in Maharashtra, and you bill a client ₹25,000 for a project at 18% GST.

Client is also in Maharashtra (intra-state):
Taxable value: ₹25,000.00
CGST (9%): ₹2,250.00
SGST (9%): ₹2,250.00
Total payable: ₹29,500.00

Client is in Karnataka instead (inter-state):
Taxable value: ₹25,000.00
IGST (18%): ₹4,500.00
Total payable: ₹29,500.00

Notice the total payable is identical either way — ₹29,500. The split changes, the total tax burden on your customer doesn't. This is exactly why the mistake is so easy to make and so easy to miss: an invoice with the wrong split can still "foot" correctly and look fine to a quick glance.

The most common mistake — and why it matters

The single most common invoicing error is charging CGST + SGST on an inter-state supply (or the reverse) — usually because a business defaults to whatever their billing tool pre-fills, or copies an old invoice template without checking the customer's actual GSTIN state.

This isn't just a cosmetic error. Input tax credit (ITC) is claimed against the specific tax head that was actually charged. If your customer is in Karnataka and you mistakenly charge CGST+SGST (Maharashtra taxes) instead of IGST, your customer generally cannot use that CGST/SGST as credit against their own output tax liability in Karnataka — the tax heads don't match their state. The invoice may need to be cancelled and reissued, which delays payment and creates unnecessary back-and-forth with a client who did nothing wrong.

How to avoid it

• Always check the customer's GSTIN, not just their billing address. A company can be billed at one address but registered under a GSTIN from a different state — the GSTIN's state code (the first two digits) is what determines place of supply for most B2B cases, not the mailing address on the PO.
• Don't manually pick CGST/SGST vs IGST from memory. The moment tax selection depends on a person remembering to check, it will eventually be wrong on a rushed invoice.
• Let the split be computed automatically from the party's state, every time. This removes the human judgment call entirely — the software knows the supplier's state and the customer's state and picks the correct split, with zero risk of an invoice going out with a leftover default.

This is exactly what Settle's tax engine does — every invoice line is split into CGST/SGST or IGST automatically based on the place of supply, computed from the actual party record, not a dropdown someone has to remember to change.