Meaning of IGST

IGST refers to the Integrated Goods and Services Tax which is a part of GST under the concept of one nation one tax. It is one of the 3 types of taxes and is under the Integrated Goods and Services Tax Act, 2017. It is charged on the goods and services supplied from one state to another.

Features of IGST

  • IGST equals to CGST+SGST. IGST model envisages that the centre will levy tax at a rate approximately equal to CGST+SGST on Inter-State supply of goods & services.
  • It is a destination based tax and will accrue to importing state.
  • It will lower tax burden by taxing Inter-State transaction only once.
  • B2B transactions – tax will flow to the State where Purchaser claims Input Tax Credit.
  • B2C transactions – tax will flow to the State of Consumer, otherwise tax will remain in the State of Seller.

Examples of IGST

1. Tax rate of CGST and SGST are 15% and 12% respectively.

Anil, a Chennai registered trader, sold goods to Dev, a Mumbai registered trader, for Rs. 10 Lakhs and further Dev sold the goods to Bharat, a Delhi registered retailer, for Rs. 11 Lakhs.

Firstly, Anil sold the goods to Dev

  • Anil willl collect IGST at the CGST+SGST rate on Rs. 10 Lakhs.
  • Dev will get the credit which he can use for further payment of his GST. This credit will be given after the payment of IGST to Anil on Rs. 10 Lakhs.

Secondly, Dev sold the goods to Bharat

  • Dev will collect IGST at the CGST+SGST rate on Rs. 11 Lakhs.
  • Bharat will get the credit which he can use for further payment of his GST. This credit will be given after the payment of the IGST to Dev on Rs. 11 Lakhs.

So Finally, Maharashtra will get the SGST on Rs. 10 Lakhs from Chennai on the first transaction between Anil and Dev. Maharashtra will also be collecting tax on the second transaction between Dev and Bharat on the amount of Rs. 11 Lakhs which it will further transfer to the Central Government (CGST) and to the Delhi government (SGST).

Delhi will get the SGST on the amount of Rs. 11 Lakhs from the transaction between Dev and Bharat.

Hence, Inter-State trade will benefit as the interstate transactions do not have to be taxed twice. This is in contrast to present taxation regime where if you purchased goods from Mumbai you pay tax there and then again in your state in which you ultimately sell it.  These will help the traders to increase their Inter-State trade by lowering tax burden.

2.Impact of IGST

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