The basic difference between the Destination based tax  and  origin based tax lies in the fact that origin based taxation seeks to levy and collect tax on the basis of location of production and destination based taxation seeks to levy and collect tax on the basis of location of consumption.This article is all about the difference between Destination based tax and Origin based tax in which you can get more details about the differences basis on its structure, taxation of export, taxation of import and examples.

Conditions Destination Based tax Origin Based tax
Structure

Destination Based tax is the name suggests is the taxation based on destination or consumption of the goods or services.

Origin based tax is levied where goods or services are produced not where consumed.

Example

If A in Gujarat produces the goods and sells the goods to B in Rajasthan, then in such case the tax should be levied and collected and should accrue on the goods in the State of Rajasthan and not in the State of Gujarat.

If A in Gujarat produces the goods and sells the goods to B in Rajasthan, then in such case the tax should be levied and collected in the State of Gujarat and not in the State of Rajasthan.

Taxation of Export

Exports would not be taxed and would be zero rated in the territory as tax under this principle is levied in the territory where the goods or services are finally consumed.

Exports would always be taxed in the origin based taxation as tax under this principle is levied on goods or services produced in the territory irrespective of the fact that whether the same is meant for export or domestic consumption.

Taxation of Import

Imports would be taxed in the territory where they have been imported as they would be consumed in that territory.

Imports would not be taxed in the territory where they have been imported for consumption, as origin based taxation only provides for levy of tax on the goods and services on the basis of territory where they are produced.

Indian Model of IGST:  Destination Based Tax

A supply of goods and/or services in the course of import into the territory of India shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce is called IGST.

Interstate trade or commerce will, therefore include supply of goods / services in the course of

  • Inter-state trade or commence
  • Import into Indian territory (deemed to be inter-state)
  • Export (deemed to be inter-state)

Thus, IGST shall apply to inter-state transactions and import as well as export transactions (deemed to be inter-state transactions) relating to supply of goods and / or services.

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