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.
- It is a destination-based tax.
- A dual levy is levied i.e, (CGST+SGST).
- Credit Mechanism is applicable.
- Everything has to be mandatorily taxed.
- 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-
- CVD (Countervailing Duty)
- SAD (Special Additional Duty)
- 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
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-
- Edible Vegetables
- Raw Silk
- Pooja Samagri
- Live Animals(Except Horses)
- Sanitary Napkins
- Printed Books
- Hearing Aids
- 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
- 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.
Q- What Is Meant By IGST?
- IGST means Integrated Goods & Services Tax.
- It is levied on goods and services that are done within the state and other states.
- It is a destination-based tax.
Q- Who Will Pay IGST?
- All inter-state supplies include under the IGST Act will have to pay this tax.
- It also includes imports and exports in India.
Q- How IGST Is Divided?
- IGST is divided amongst the goods and services taxations that occur between the center and the state.
- It is divided between the consuming state and central government.
Q- Can I Claim IGST?
- IGST can be claimed by registered GST individuals on Export Payment Refunds.
- It commences by exerting reference to an original document known as a shipping bill.
Q- What Is the IGST Rate On Imports?
- IGST rate on imports are-
- Basic Custom Duty- 10%
- Education Cess- 3%
- IGST- 18%
Q- Can Hotels Charge IGST?
- No, hotels cannot charge IGST separately.
- As customers belong to different states, they can only charge CGST and SGST.
Q- How Do I Claim IGST Paid On Imports?
- If you want to avail of an ITC (Input Tax Credit) or GST Compensation Cess, you have to declare your GST Registration number (GSTIN).
- This has to be done in your Bill of Entry.
- You have to issue a Provisional ID that'll be issued by GSTN.
- It can be notified during your shift period.
Q- What Are The Advantages And Disadvantages Of IGST?
Advantages of IGST
- Easy maintenance of ITC (Input Tax Credit) chain.
- Better tracking of inter-state transactions.
- No refund claims for exporting states.
- The IGST model is self-monitored.
- Can take account of both B2B & B2C transactions.
Disadvantages of IGST
- Computerised process.
- Software training needed.
- Rate Slabs differ state-wise.
Q- What Is IGST In Export?
- Exporters can charge IGST on their Export Invoice with its applicable rates.
- When IGST is paid, the refund can be claimed via ITC on unutilised goods and services.