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IGST Overview

Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-State trade or commerce.

IGST shall be levied and collected by Centre on inter-state supplies. IGST would be broadly CGST plus SGST and shall be levied on all inter-State taxable supplies of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.

IGST Features

Maintenance of uninterrupted ITC chain on inter-State transactions;

No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer

No refund claim in exporting State, as ITC is used up while paying the tax;

Self-monitoring model

Ensures tax neutrality while keeping the tax regime simple.

Simple accounting with no additional compliance burden on the taxpayer;

Would facilitate in ensuring high level of compliance and thus higher collection efficiency. Model can handle business to business as well as ‘Business to Consumer’ transactions.

IGST Payment

The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of GST will be done using the following hierarchy;-

First available ITC of IGST shall be used for payment of IGST

Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment of IGST

If both ITC of IGST and ITC of CGST are exhausted, then only the dealer would be permitted to use ITC of SGST for payment of IGST.

 

Remaining IGST liability, if any, shall be discharged using payment in cash. GST System will ensure maintenance of this hierarchy for payment of IGST using the credit.

There would be settlement of account between the centre and the states on two counts, which are as follows-

 

Centre and the exporting state: The exporting state shall pay the amount equal to the ITC of SGST used by the supplier in the exporting state to the Centre.

Centre and the importing state: The centre shall pay the amount equal to the ITC of IGST used by a dealer for payment of SGST on intra- state supplies.

The settlement would be on cumulative basis for a state taking into account the details furnished by all the dealer in the settlement period. Similar settlement of amount would also be undertaken between CGST and IGST account.

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