There is no single percentage by which all GST receipts are split between the Centre and States. Intra-State supplies generally attract separate CGST and SGST (or UTGST) components. Inter-State supplies and imports attract IGST, which the Union collects and then apportions and settles under law. Credit use and account transfers mean IGST is not simply divided 50:50 when collected.
How the three GST channels differ
| Channel | Initial levy or collection | How the State or Union Territory receives its share | Important qualification |
|---|---|---|---|
| Intra-State supply | CGST plus SGST, or UTGST for a Union Territory | The SGST or UTGST is a separate tax component | It is not one pooled receipt later divided by a universal ratio. |
| Inter-State supply or import | IGST collected by the Union | Statutory apportionment and settlement route amounts to relevant tax accounts | Credit use and settlement affect the flow; gross IGST is not automatically split equally. |
| Compensation cess | A separate cess under the transitional compensation framework | Subject to the separate compensation fund and statutory payment arrangements | It is not the ordinary formula for sharing CGST, SGST or IGST. |
For a sale within one State, CGST and SGST are separate taxes
India’s GST framework gives both the Union and State legislatures power to tax supplies. For a supply classified as intra-State, the usual structure is central GST (CGST) alongside State GST (SGST). For a Union Territory, the jurisdictional component is generally Union Territory GST (UTGST) instead of SGST.
That is why saying “the Centre and State each get half” can mislead. The taxes are separately levied components, not a single receipt that is always collected into a common pool and divided later. The applicable tax treatment depends on the supply’s classification and the relevant rate notification.
For inter-State sales and imports, the Union collects IGST
For supplies in the course of inter-State trade or commerce, Article 269A of the Constitution provides that GST is levied and collected by the Government of India, then apportioned between the Union and States as provided by Parliament by law on GST Council recommendations. Imports are treated as inter-State supplies for this purpose.
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So, the Union’s initial collection of IGST does not mean it keeps the entire amount as final revenue. Nor does it mean that every State automatically receives half of each gross IGST payment. The statutory apportionment and settlement process, including the relevant supply and eligible tax credits, determines how amounts reach central, State or Union Territory tax accounts.
Why IGST is not a simple 50:50 cash split
IGST is designed to work with input-tax credit across State borders. Businesses may use eligible credits across the relevant tax accounts, and the law provides for apportionment and transfers among central, State and Union Territory accounts. The result is a sequence of credit use and account settlement, rather than an equal cash division at the moment IGST is collected.
Year-end balances add another layer. A 2018 GST Council agenda note described how an unsettled balance remaining in the IGST account at the end of a financial year was treated under the rules and devolution framework then discussed. That historical explanation should not be treated as the current settlement procedure. The Department of Revenue’s acts-and-rules index lists Goods and Services Tax Settlement of Funds Rules 2026; the operative rule text and any later amendments or notifications govern current procedure.
Compensation cess follows a separate framework
The compensation-cess framework was established to address specified State revenue losses arising during GST’s transition. Cess receipts, compensation payments and related borrowing are distinct from the ordinary flows of CGST, SGST, UTGST and IGST. They should not be combined into a claim that all GST revenue is divided according to the compensation mechanism.
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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteThe cess framework’s current collection status, outstanding obligations and any restructuring are date-sensitive. Those details require checking the applicable current law and official orders; they do not change the basic distinction between cess and the regular GST channels.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What GST Council discussions do—and do not—establish
Minutes of the 54th GST Council meeting recorded a negative balance in the IGST account, discussed historical practices for positive and negative balances, and included a proposal to revisit State allocation ratios. The 55th meeting material also discussed the IGST balance and compensation-cess restructuring.
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Meeting minutes establish that these issues were discussed; they do not, by themselves, enact a new general sharing formula. A claim about the formula currently in force must be based on the operative settlement rules or a subsequent official order, not merely on a Council proposal or discussion.
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