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What Is IGST? Full-Form, Meaning & Applicability.

Sukanya Mukherjee -

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

  1. The Integrated Goods & Services Tax is the last and most important factor in the taxation system of India.
  2. It is collected by the government for interstate supplies of goods and services.
  3. 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.
  4. It falls under the Integrated Goods & Services Tax Act of 2016 and levied during most interstate moments of import and export.
  5. When the location of the supplier and the place of supply is present in different states, IGST becomes obligatory.
  6. 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

  1. Suppose a dealer named Pranav from Rajasthan supplies/sells goods worth 2,00,000 lakh rupees to Arjun in Chandigarh.
  2. The applicable GST rates in addition to IGST is equal to 18%.
  3. In this case, the dealer will have to collect Rs. 36,000 as IGST that will further go to the center.
  4. The total amount payable would be amounting to 2,36,000 rupees.
  5. 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?

  1. According to the GST Act of 2017, under Section 49(5), provisions a method of using ITC for GST payments in output tax liability.
  2. For instance, IGST can be set off against itself, after that comes SGST & CGST.
  3. 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-
  1. Poultry
  2. Fish/Meat
  3. Cereals
  4. Edible Vegetables
  5. Raw Silk
  6. Pooja Samagri
  7. Live Animals(Except Horses)
  8. Sanitary Napkins
  9. Sindoor
  10. Bangles
  11. Printed Books
  12. Hearing Aids
  13. Medicines
  14. Aircraft/Airforce Fuel
  15. 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

  1. Under specific circumstances, international tourists and merchants can file for return in their taxations.
  2. 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-
  1. Application for Refund
  2. Track Application Status
  3. My Saved/Submitted Applications
  4. 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-
  1. You can also click on the Count Column to check the level of your invoices.
  2. After clicking you'll receive a validation error against each invoice, that will segregate your details.
  • Step 9- Click on DOWNLOAD FAILED INVOICES
  1. 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.
  2. In IGST based businesses, the merchant has to collect the tax from the purchaser.

Also read:

Types of GST in India
How to pay GST online? Step-by-Step Guide
Frequently asked questions on GST

FAQs

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?

  1. All inter-state supplies include under the IGST Act will have to pay this tax.
  2. 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?

  1. IGST can be claimed by registered GST individuals on Export Payment Refunds.
  2. 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-
  1. Basic Custom Duty- 10%
  2. Education Cess- 3%
  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?

  1. If you want to avail of an ITC (Input Tax Credit) or GST Compensation Cess, you have to declare your GST Registration number (GSTIN).
  2. This has to be done in your Bill of Entry.
  3. You have to issue a Provisional ID that'll be issued by GSTN.
  4. 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

  1. Computerised process.
  2. Software training needed.
  3. 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.