OneTax GST
News & Updates

Overview of the IGST Act


Q 1.     What is IGST?

Ans.   “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.

Q 2.     What are inter-state supplies?

Ans.    A supply  of  goods  and/or  services in  the course  of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States, two different union territory or in a state and union territory Further import of goods and services, supplies to SEZ units or developer, or any supply that is not an intra state supply. (Section 7 of the IGST Act).

Q 3.     How will the Inter-State supplies of Goods and Services be taxed under GST?

Ans.   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.


Q 4.     What are the salient features of the draft IGST Law?

Ans.   The draft IGST law contains 25 sections divided into9

Chapters. The law, inter alia, sets out the rules for determination of the place of supply of goods. Where the supply involves movement of goods, the place of supply shall be the location of goods at the time at which the movement of goods terminates for delivery to the recipient. Where the supply does not  involve movement  of goods,  the place of supply shall  be the  location of such goods at the time of delivery to the recipient. In the case of goods assembled or installed at site, the place of supply shall be the place of such installation or assembly. Finally, where the goods are supplied on board a conveyance, the place of supply shall be the location at which such goods are taken on board. The law also provides for determination of place of supply of service  where  both  supplier  and  recipient  are  located  in India (domestic supplies) or where supplier or recipient is located outside India (international supplies). This is discussed in details in the next Chapter. It also provides for certain other specific provisions like payment of tax by online information and database access service  provider  located outside  India  to an  unregistered person in India, upon taking registration in India, under the IGST Act, following a simplified provision (section 14 of the IGST Act),

Q 5.     What are the advantages of IGST Model?

Ans.   The major advantages of IGST Model are:

a.          Maintenance  of  uninterrupted  ITC  chain  on  inter- State transactions;

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

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

d.          Self-monitoring model;

e.          Ensures tax neutrality while keeping the tax regime simple;

f.           Simple accounting      with     no        additional compliance burden on the taxpayer;

g.          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.

Q 6.     How will imports/exports be taxed under GST?

Ans. All imports/exports will be deemed as inter-state supplies   for   the   purposes   of   levy   of   GST   (IGST).   The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available as ITC of the IGST paid on import on goods and services. Exports of goods and services will be zero rated.   The exporter has the option either to export  under  bond  without  payment  of  duty  and  claim refund of ITC or pay IGST at the time of export and claim refund of IGST. The IGST on imports is leviable under the provisions of the Customs Tariff Act and shall be levied at the time of imports along with the levy of the Customs Act

(Section 5 of the IGST Act)

Q 7.     How will the IGST be paid?

Ans.     The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of IGST 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.

Q 8.     How    will    the    settlement    between    Centre, exporting state and importing state be done?

Ans.    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.

Q 9.     What  treatment  is  given  to  supplies  made  to SEZ units or developer?

Ans: Supplies to SEZ units or developer shall be zero rated in the same manner as done for the physical exports. Supplier shall have option to make supplies to SEZ without payment of taxes and claim refunds of input taxes on such supplies (section 16 of the IGST Act).

Q 10.   Are     business     processes     and     compliance requirement same in the IGST and CGST Acts?

Ans: The procedure and compliance requirement are same for processes likes registration, return filing and payment of tax. Further, the IGST act borrows the provisions from the CGST Act as relating to assessment, audit, valuation, time of supply, invoice, accounts, records, adjudication, appeal etc. (Section 20 of the IGST Act)