If you have just registered for GST, the first thing that confuses almost everyone is why the same sale is sometimes split into two taxes and sometimes charged as one. It looks arbitrary. It is not.
The three acronyms, in one line each
CGST is Central GST, collected by the Central Government. SGST is State GST, collected by the State Government. IGST is Integrated GST, collected centrally and later apportioned between the Centre and the destination state.
The important thing is that these are not three different tax rates to choose between. They are two different ways of splitting the same total tax on a sale.
The rule: it depends on where the supply goes
If your business and the place of supply are in the same state, the tax is split in half: CGST plus SGST. If they are in different states, the whole amount is charged as IGST instead.
So on the same sale at the same rate, a customer in your own state sees two tax lines, and a customer in another state sees one. The total the customer pays is the same either way. Only the split differs.
What place of supply actually means
This is the part worth slowing down on, because most mistakes here come from assuming place of supply means the customer's billing address.
For goods that move, it is generally where the goods are delivered. For goods handed over the counter, it is where the sale happens. For services, the rules vary by type of service, and some categories have their own specific provisions.
Where this bites in practice is a customer whose registered address is in one state but who is taking delivery in another. That is a real case, and it is why place of supply is a separate field on a tax invoice rather than something inferred from the customer record.
Why getting the split wrong is a real problem
An incorrect split is not a cosmetic error. It affects what your buyer can claim, and it shows up as a mismatch when returns are filed on both sides. Corrections after the fact mean credit notes and amended filings, which is a great deal more work than getting it right at the point of sale.
It also tends to be systematic rather than occasional. If your billing setup has the wrong state recorded for your own business, every invoice you issue is wrong in the same direction until someone notices and the whole period has to be revisited.
What this means for your billing setup
Because the rule depends entirely on two pieces of data, your own registered state and the place of supply, the practical fix is to make sure both are recorded correctly once, rather than decided per sale by whoever is at the counter.
Software should then apply the rule for you. That is genuinely a solved problem: given the two states, the split is deterministic, and there is no judgement call for a human to make at billing time.
The numbers change, the mechanics do not
Deliberately, this article does not list rate slabs or thresholds. Those get revised, and an article that quotes them confidently is an article that is quietly wrong a year later. Rates for your goods, and any thresholds that apply to your turnover, are worth confirming with your CA rather than with a blog post.
What does not change is the structure above: same state means CGST plus SGST, different states means IGST, and place of supply is what decides which.
The same sale, worked two ways
Take a sale of goods where the applicable rate happens to be eighteen per cent, and the taxable value of the line is one thousand rupees. The tax on that sale is one hundred and eighty rupees, and that figure does not change based on where the customer is.
If the place of supply is in your own state, the invoice shows two lines: ninety rupees of CGST and ninety rupees of SGST. If it is in another state, the invoice shows one line: one hundred and eighty rupees of IGST. Either way the customer pays one thousand one hundred and eighty rupees.
Once you have seen it laid out like that, the rule stops feeling arbitrary. The split is an accounting question about which government receives what. It is not a question about your customer paying more or less.
Where people get caught
Three situations account for most errors. A customer registered in one state taking delivery in another. A business that has moved premises but never updated its own registered state in its billing setup. And counter staff choosing the split manually because the software lets them.
All three are setup problems rather than knowledge problems, which is good news: they are fixable once rather than needing to be remembered.
How Vanij handles this
Vanij takes your firm's state from your business profile and the customer's from their record, then applies the split automatically on every tax invoice. Your invoice shows the correct lines without anyone choosing between them at the counter.
For more on which document you should be issuing in the first place, see GST Invoice vs Bill of Supply vs Simple Bill, or the GST and Compliance FAQ.