CGST vs SGST vs IGST — What Every Indian Freelancer Must Know

Under the Goods and Services Tax (GST) system in India, tax structures are unified but split into three categories: CGST, SGST, and IGST. For freelancers, consultants, and agencies issuing invoices, choosing the wrong tax type is one of the most common errors. Understanding the difference between CGST SGST IGST is vital to keep your books compliant.

In this guide, we will explain what these taxes are, how the Place of Supply determines which tax applies to your bill, and how Khatago automates this entire calculation for you.

Demystifying CGST, SGST, and IGST

Let's define each component:

  • CGST (Central Goods and Services Tax): The tax collected by the Central Government on an intrastate (within the same state) transaction.
  • SGST (State Goods and Services Tax): The tax collected by the State Government on an intrastate transaction.
  • IGST (Integrated Goods and Services Tax): A single integrated tax collected by the Central Government on interstate (between two different states) transactions, which is then distributed to the consuming state.

    • Intrastate vs. Interstate Transactions

    The choice of tax depends entirely on the location of the supplier (you) and the Place of Supply (your client).

    1. Intrastate Transactions (Same State)

    If your billing address is in Mumbai (Maharashtra) and your client's office is in Pune (Maharashtra), the transaction is intrastate.

  • Tax Rule: You apply CGST and SGST.
  • Calculation Example: For a web design service worth ₹10,000 taxed at 18%:
  • Total GST = 18% of ₹10,000 = ₹1,800.
  • CGST (9%) = ₹900.
  • SGST (9%) = ₹900.
  • Your invoice will list these two taxes separately.

    • 2. Interstate Transactions (Different States)

    If your billing address is in Mumbai (Maharashtra) and your client's office is in Bengaluru (Karnataka), the transaction is interstate.

  • Tax Rule: You apply a single IGST.
  • Calculation Example: For a service worth ₹10,000 taxed at 18%:
  • IGST (18%) = ₹1,800.
  • Your invoice will list this as a single line for IGST.

    • How to Determine Place of Supply

    For services, the Place of Supply is generally the location of the recipient of the service.

  • If your client has a registered business with a GSTIN, their state of registration is the Place of Supply.
  • If your client is an unregistered individual, their billing address determines the Place of Supply.
  • If the client is outside India (exports), it is considered an interstate supply taxed at 0% (Zero-Rated), provided you have a valid Letter of Undertaking (LUT).

    • How Khatago Automates GST Splits

    Doing these splits manually is slow and prone to calculation mistakes. Khatago resolves this by automating the backend calculations:

  • When you select the client's state in the billing form, Khatago compares it with your registered state.
  • If the states match, Khatago splits the tax rate equally between CGST and SGST and updates the invoice table.
  • If the states are different, Khatago applies the full rate to IGST.
  • If the client is located outside India, it applies Export rules automatically.

    • GSTR-1 filing guide for freelancers

    What Happens if You Charge the Wrong Tax?

    If you mistakenly charge CGST/SGST instead of IGST (or vice versa):

  • You must pay the correct tax to the government.
  • You must claim a refund for the tax type you paid in error.
  • Your B2B client's GST portal will flag a mismatch, blocking their Input Tax Credit (ITC).

    • free GST invoice generator