What is Dual GST Model in India? Overview & Benefits

2025-06-16

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Key Takeaways

Centre and State governments co-share GST responsibilities, reflecting India's federalism.
CGST and SGST are separately credited, and no cross-utilisation ensures tax accounting transparency.
Simplified returns and PAN-linked GSTIN ease small and mid-sized business processes.
The model abolishes tax-on-tax, cutting suppliers' and consumers' costs.
The GST Council serves as a central body that settles Centre-State disputes efficiently.

Meaning of dual GST model in India

Dual GST model or dual GST structure is a simple tax with two different taxation components. Central Goods and Service Tax (CGST) and the State Goods and Service Tax (SGST) are the tax components that can be levied on a single transaction in India within a state on account of its federal nature.

Moreover, both governments have been assigned distinct responsibilities, as prescribed under the division of powers statute of the Constitution. Overall, a dual GST structure is designed to align with the Constitutional requirements of fiscal federalism.

Features of the Dual GST Model:

The GST or Goods and Service Tax has two components – one levied by the central government (referred to as Central GST or CGST), and the other collected by the State governments (referred to as State GST or SGST)
Both CGST and SGST apply to all transactions pertaining to goods and services
Both CGST and SGST are paid to the respective accounts of the Central and the States governments individually
CSGT and SGST are treated individually, implying that the taxes paid against the CGST are allowed to be considered as Input Tax Credit (or ITC)
Cross utilization of the Input Tax Credit between CGST and SGST is not permitted, except for the inter-state supply of goods and services
Credit accumulation based on the GST refund is to be avoided by both the Central and State governments except in the case of exports, input tax at a higher rate than output tax, and purchase of capital goods, among others
There is a uniform procedure for collection of both CGST and SGST, as prescribed in their respective legislation.
The composition or compounding scheme for GST has an upper ceiling and a floor tax rate concerning the gross annual turnover.
As a taxpayer, you must submit periodic returns, in a standard format, to both the CGST and SGST authorities.
Each taxpayer is allotted a 14-15 digit PAN-linked taxpayer identification number

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Benefits of Dual GST:

The Dual GST structure is a transparent and straightforward tax model with a pre-defined set of CGST and SGST rates. The benefits of having a dual GST structure include –

Reduction in the total number of taxes levied by the Central and State governments
A decrease in the effective tax rate for different goods
Elimination of the existing cascading effect of taxes
Reduction of the taxpayer’s transaction costs through simplified tax compliance
Increased tax collections based on a broader tax base and improved compliance

Did You Know?

India’s GST mop-up for March 2025 surged to ₹1.96 lakh crore—the second-highest ever, signalling growing compliance and economic resilience.

Source: PIB India

Impact and Implications of Dual GST Model

The dual GST model has been a replacement for the overly complicated tax structure that existed before. So, the biggest beneficiaries of the new system have been the merchants and businesses who had to track, record, collect and file multitudes of taxes every month.

Another area of improvement, which was also a goal of the new GST Model, was the rate of final goods and services to the consumer. The Dual GST model aims to eliminate the cascading effect of indirect taxation on the final goods and services. Thus, if the benefits of lower taxes pass on to the consumers, they should experience lower prices.

Since dual GST means both State and Central Governments can impose and collect taxes, there is a possibility of dispute. The GST Council is expected to draw the guidelines for resolving such disputes.

Ultimately, the dual GST model should benefit the taxpayers and consumers the most. It is simpler to follow and provides easier tax filing methods, which small business owners can easily manage

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The dual GST model has transformed India's tax system by simplifying compliance, increasing transparency, and fuelling economic growth. For individuals and enterprises in search of hassle-free financial planning and tax-synced solutions, reliable institutions like Canara HSBC Life Insurance continue to augment this developing ecosystem.

Glossary

CGST: Central tax on goods/services supplied within a state, shared with the Centre under the GST system.
SGST: State tax on intra-state supplies of goods/services, collected by the respective state government.
IGST: Tax on inter-state supply of goods/services, collected by the Centre and shared between the Centre and States.
ITC: Input Tax Credit allows businesses to reduce tax payable by claiming credit on taxes paid for purchases.
GST Council: Authority that governs GST laws and rates.

FAQ on Dual GST

Income tax in India is based on incremental slab rates. The rate of tax is higher on higher income. You can also avail deductions from your taxable income if you invest in eligible instruments like PPF, NPS, ELSS, ULIPs, etc. Starting AY 2024-25 you have two tax regimes – old and new. The old tax regime has all the deductions from gross total income, while the new tax regime offers a lower rate of tax. So, if you are not investing in tax-saving instruments you can file your tax as per the new tax regime.

You can avail additional tax savings under the following sections other than section 80C:

a) Section 80D: Health insurance premium payments for family and parents up to Rs 75,000
b) Section 80CCD(1B): Self-contribution to NPS Tier-I account above 10% of salary or 20% of income if self-employed up to Rs 50,000
c) Section 80E: Education loan interest paid through the year
d) Section 80EE: Home loan interest paid up to Rs 50,000
e) Section 80G: Charitable contributions to non-profit organisations registered under section 12A up to 50% or 100% of the contribution
f) Section 24B: Interest paid on home loan

You have many tax-saving investment options. You can consider the following popular tax-saving schemes to save tax:

a) Term life insurance plan
b) Health and critical illness insurance plan
c) Life insurance plans such as endowment and moneyback plans
d) Pension plans from life insurance companies
e) Public Provident Fund (PPF)
f) National Pension System Tier-I account (NPS)
g) Employee Provident Fund (EPF)
h) Unit Linked Insurance Plans (ULIPs)
i) Equity Linked Savings Scheme (ELSS)
j) Senior Citizen Savings Scheme
k) Sukanya Samriddhi Yojana
l) 5-Year Tax Saving Fixed Deposits
m) National Savings Certificate (NSC)

Deduction of Rs 1.5 or 2 Lakhs under section 80C is available when you make investments or spend money under the heads mentioned in the Chapter VI A of the Income Tax Act, 1961. All tax-saving investments like PPF, NPS, ULIP, ELSS, etc. and all tax-saving expenses like children’s tuition fees, and registration expenses of a house property are part of Chapter VI A.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.