Integrated Goods and Services Tax

Integrated Goods and Services Tax: The Complete Guide 

Unlike multiple taxes such as Central Excise, Service Tax, State VAT, etc., the GST introduces just one tax with three components- CGST, SGST, and IGST. Under the GST law, the central government will collect CGST, SGST, or IGST, depending on whether the transaction is intrastate or interstate.

IGST: Full Form and Meaning

The full form of IGST is Integrated Goods and Services Tax. Under GST, IGST is a tax levied on all interstate supplies of goods and services across two or more states or Union Territories. Further, IGST charges and collection will be governed by the IGST Act, 2017, as amended occasionally.

Under IGST, Tax shares between the Central and State governments. IGST percentage is the combination of the CGST and SGST.

Example of IGST

An example of IGST (Integrated Goods and Services Tax) is when a manufacturing company in one State sells its products to a customer in another state within India. The IGST collected by the center on the transaction is then distributed to the respective states per the destination principle.

Things to Keep in Mind About IGST

There are two crucial points you need to keep in mind regarding IGST:

  • The importing State gets the final tax revenue.
  • Integrated Goods and Service Tax or IGST combines the government share of the State Goods and Services Tax and the Central Goods and Services Tax.

Characteristics of IGST

The GST Act controls IGST charges. The Centre would charge IGST, that would be CGST and SGST, on all inter-state payments of taxable supplies, as per the IGST Act. The characteristics of IGST ARE:

  • It suggests that the consuming State receives the SGST component of the IGST Tax.
  • The Input Tax Credit clears the chain, preserving clarity in inter-state supplies.
  • CST (Central Sales Tax) Act, 1956, was dismissed.
  • It also refers to products and services imported into India. 
  • The basic principle is that any transportation of products and services during the imports of goods and services into the union of India is known as an inter-state exchange or exchange supply and is the liability of IGST.

IGST Refund

The refund of IGST goes to the taxpayers who have remitted payments to another tax head, that is, SGST or CGST, instead of IGST. 

Advantages of the IGST Act

Following are some of the benefits of the IGST Act:

  • IGST is a simple, transparent, and self-monitoring model. 
  • IGST helps in the maintenance of tax neutrality in the country. 
  • The overall tax-paying process will be quick with no additional burdens on the taxpayer. 
  • There is no requirement for the physical verification of documents and claims, as all the relevant data will be available on the GSTN server.
  • Tax payment will be online, making the process easy and invulnerable to disputes and manipulations. 
  • It ensures that the Input Tax Credit chain for the Interstate transactions is continuous. 
  • There will be no significant blockage of funds or an upfront tax payment for the Interstate sellers and buyers. 
  • There will be no requirement to claim refunds in the exporting State.
  • IGST helps efficiently manage ‘Business to Business’ (B2B) and ‘Business to Consumer’ (B2C) transactions. 
  • The uniformity in tax rates and simplified procedures in the country will also help minimize compliance costs.

Applicability of IGST

Integrated Goods and Services Tax is relevant when there is a supply of goods or services between two or more Indian states and import transactions. It ensures a unified and simplified tax system for interstate business transactions.

Difference between GST and IGST

The main differences between GST and IGST are:

  • The scope and applicability of GST and IGST are different.
  • In the framework of GST, an intrastate sale transaction attracts two taxes: State Goods and Services Tax, collected by the State, and Central Goods and Services Tax (CGST), collected by the central government. Conversely, an interstate sale transaction involves a single tax, the Integrated Goods and Services Tax, collected by the central government and distributed to the states involved.

Difference between CGST, SGST, and IGST

Following are the differences between CGST, SGST, and IGST:

  • Collecting Authority- IGST and CGST are managed by the Central Government, while the State Government organizes SGST.
  • Applicability- CGST and SGST apply to intra-state transactions, while IGST applies to Inter-state trade.
  • Authority- The authority of IGST is the Central and State governments, the head of CGST is the Central government, and the administration of SGST is the State government.  

Final Term 

This blog overviews IGST and its features, importance, and contribution to State and central government.  Filling IGST may be difficult for new payers, so to ease the burden of GST, paying Eazybills comes to your rescue. With decades of experience in billing, Eazybills will assist you in Filling ITR and help you flourish your business. Contact us for further details.

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