GST guide for Shopify stores in India

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If you have a Shopify store that is based in India, this article will tell you how to correctly configure taxes with respect to the new tax legislation.

As of July 1, 2017, Goods and Services Tax (GST) has to be charged on all goods and services provided by online stores in India. GST replaces previous taxes collected by the Centre and by the State and brings them together under one unified tax.

Since India is a federal country, GST is still collected by both the Centre and the respective State. 

There are three different taxes united under GST: State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST). 

What is SGST, CGST and IGST?

  • State GST (SGST) is a GST collected by the State on intra-state sales. 
  • Central GST (CGST) is a GST collected by the Centre on intra-state sales.
  • Integrated GST (IGST) is a GST collected by the Centre on inter-state sales. IGST also applies on imported goods and services.

Intra-state sales are transactions carried out within one federal state (e.g. Maharashtra). Inter-state sales are those transactions that happen in between states (e.g. selling from Maharashtra to Goa).

For example, a store based in Maharashtra selling items taxed at 18% will charge:

  • SGST 9% + CGST 9% to a customer in Maharashtra (intra-state).
  • IGST 18% to a customer in Goa (inter-state).

Online stores based in union territories (such as Delhi) should charge Union Territory GST (UTGST) instead of SGST on intra-state sales. 

There are four different tax rates (tax slabs): 5%, 12%, 18% and 28%. These tax rates vary depending on what kind of products you sell.