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IGST- Integrated Goods & Services Tax- A Complete Guide!

IGST- Integrated Goods & Services Tax- A Complete Guide!

. 4 min read

What is IGST & are you liable to pay?

The Integrated Goods & Services Tax was introduced as a prime component of the new GST system. Implemented in July 2017, this system has been successful in bringing drastic changes to the taxation system of India. The Goods & Services Tax majorly consisted of elementary reforms that included- intrastate, interstate, and imported chain for goods and services.

Almost every small and big business is mandatorily responsible for getting registered under GST. Before we begin discussing the briefer aspects of IGST, let us understand some basic segments of IGST.

  1. It is a destination-based tax.
  2. A dual levy is levied i.e, (CGST+SGST).
  3. Credit Mechanism is applicable.
  4. Everything has to be mandatorily taxed.

IGST Meaning

The Integrated Goods & Services Tax is the last and most important factor in the taxation system of India. It is collected by the government for interstate supplies of goods and services. Apart from maintaining the integrity of the Input Credit Chain, IGST also ensures that all revenues collected from the people will be equally divided amongst the State and Central Government.

It falls under the Integrated Goods & Services Tax Act of 2016 and levied during most interstate moments of import and export. When the location of the supplier and the place of supply is present in different states, IGST becomes obligatory.

The Integrated Goods & Services Tax has helped India in replacing multiple indirect taxes that include-

  1. CVD (Countervailing Duty)
  2. SAD (Special Additional Duty)
  3. CESS (Assess or Tax on Tax)

Example Of IGST

Suppose a dealer named Pranav from Rajasthan supplies/sells goods worth 2,00,000 lakh rupees to Arjun in Chandigarh. The applicable GST rates in addition to IGST is equal to 18%.

In this case, the dealer will have to collect Rs. 36,000 as IGST that will further go to the center. The total amount payable would be amounting to 2,36,000 rupees. Supplies made internationally will also be obligated to pay this tax.

Features Of IGST

  • Every state that is involved in the importing of goods and commodities will be obligated to pay IGST.
  • Taxes would be collected at a price nearly parallel to the center & state shares on every other inter-state supplies of goods and services.
  • Lowers tax burdens by singling out inter-state transactions.
  • In the case of B2C transactions, the taxes will circulate to the State of Consumer otherwise it will be contained in the State of Seller.
  • In the case of B2C transactions, the taxes will be circulated to the respective state, where the purchaser can claim ITC (Input Tax Credit).
  • Inter-state trading eliminates the previously present double taxations.

Can CGST Be Adjusted Against IGST?

According to the GST Act of 2017, under Section 49(5), provisions a method of using ITC for GST payments in output tax liability. For instance, IGST can be set off against itself, after that comes SGST & CGST. This segment helps in ensuring the tax to remain a destination-based consumption tax.

IGST- Set off- IGST- Set off- IGST

CGST- Set off- CGST- Set off- IGST

SGST- Set off- SGST- Set off- IGST

Chart explaining breakdown of GST

Exemptions From IGST or GST

The IGST law will apply to the whole of India excluding Jammu & Kashmir. Other than that, 0% tax will be incorporated for goods and services like-

Poultry, Fish/Meat, Cereals, Edible Vegetables, Raw Silk, Pooja Samagri, Live Animals(Except Horses), Sanitary Napkins, Sindoor, Bangles, Printed Books, Hearing Aids, Medicines, Aircraft/Airforce Fuel, Alcohol & Tobacco

Note: Items for export purposes to Nepal and Bhutan into India are also excluded from IGST.

What Counts As Inter-State Supply

It's accountable as an inter-state supply if you meet one of the below criteria-

  • One state and one Union Territory
  • Two separate States
  • Two separate Union Territories

IGST Refund

Under specific circumstances, international tourists and merchants can file for return in their taxations. Check out the steps to track your IGST refund on your export-related goods.

Step 1- Visit the official GST portal i.e. https://www.gst.gov.in/

Step 2- Login in with your credentials

Step 3- Click on Services and then click on Refunds

Step 4- You will see the following options

  • Application for Refund
  • Track Application Status
  • My Saved/Submitted Applications
  • Track status of invoice data to be shared with ICEGATE

Step 5- Click on Search

Step 6- Add your Financial year and month

Step 7- Search results will be displayed

Step 8- You can also click on the Count Column to check the level of your invoices. After clicking you'll receive a validation error against each invoice, that will segregate your details.

Step 9- Click on DOWNLOAD FAILED INVOICES

In the case of import-export where the goods and services are supplied or are made via SEZ (Special Economic Zone) unit, the transaction is automatically assumed to be inter-state. In IGST based businesses, the merchant has to collect the tax from the purchaser.

Also read:
How to pay GST online? Step-by-Step Guide
Frequently asked questions on GST