IGST is a crucial part of India's GST structure, levied on interstate transactions. It promotes a unified national market by facilitating seamless tax credit utilization. It combines CGST and SGST, ensuring the destination state receives the tax revenue.
IGST Full Form
IGST stands for Integrated Goods and Services Tax. It is a tax levied on all interstate supplies of goods and services or across two or more states/Union Territories in India. It is one of the three main components of the Goods and Services Tax (GST) regime in India, along with the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST).
Characteristics of IGST
- IGST is a destination-based tax, meaning that it is collected by the seller and deposited with the central government, but the revenue is then distributed to the consuming state.
- IGST is levied on all interstate supplies of goods and services, including imports and exports.
- IGST rates are uniform across the country, regardless of the state of origin or consumption.
- IGST is input tax creditable, meaning that businesses can claim credit for the IGST paid on their inputs against the IGST payable on their outputs.
Significance of IGST in India’s Taxation System
IGST plays a significant role in India’s taxation system by:
- Simplifying the indirect tax structure: IGST has subsumed multiple indirect taxes such as excise duty, VAT, and service tax, making it easier for businesses to comply with the tax laws.
- Eliminating double taxation: IGST ensures that goods and services are taxed only once, even when they cross state borders. This has helped to reduce the cost of doing business and promote interstate trade.
- Increasing transparency and accountability: IGST is collected and distributed through the GST portal, which is a transparent and accountable system. This has helped to reduce corruption and improve tax administration.
IGST Rates
IGST rates are uniform across the country and are set by the GST Council. The current IGST rates are as follows:
- 0% on exports and certain exempted goods and services
- 5% on certain essential goods and services
- 12% on most goods and services
- 18% on certain luxury goods and services
- 28% on certain luxury goods and services, including sin goods
Basic IGST Formula and Examples
The basic formula for calculating IGST is:
IGST = (IGST rate * Transaction value) / 100
For example, if the Integrated Goods and Services Tax rate is 11% and the transaction value of the goods or services is ₹10,000, the IGST will be ₹1,100.
Example 1:
A supplier in Delhi sells goods to a customer in Mumbai. The value of the goods is ₹10,000. The IGST rate is 11%.
IGST = (11% * 10,000) / 100 = ₹1,100
The supplier will collect ₹1,100 IGST from the customer and pay it to the government. The government will then distribute the IGST to the central and state governments in proportion to the CGST and SGST rates.
Example 2:
A supplier in Bengaluru imports goods from China. The value of the goods is ₹10,000 and the customs duty is ₹500. The IGST rate is 11%.
IGST = (11% * 10,500) / 100 = ₹1,155
The supplier will pay ₹1,155 IGST to the government at the time of import.
Common Scenarios for IGST Calculation
Here are some common scenarios for IGST calculation:
- Inter-state sale of goods: When a supplier in one state sells goods to a customer in another state, IGST is levied on the transaction.
- Import of goods: When goods are imported into India, IGST is levied on the value of the goods plus customs duty.
- Export of goods: When goods are exported from India, IGST is refunded to the exporter.
- Supply of services to a registered person in another state: When a person supplies services to a registered person in another state, IGST is levied on the transaction.
Which State will Receive the Tax Revenue?
The tax revenue from IGST is distributed to the central and state governments in proportion to the CGST and SGST rates. For example, if the IGST rate is 11% and the CGST rate is 5%, the central government will receive 5% of the tax revenue and the state government will receive 6% of the tax revenue.
Refund of IGST(Integrated Goods and Services Tax)
Exporters of goods and services are entitled to a refund of IGST. Refunds can also be claimed for unutilized ITC, excess tax paid, and tax paid on goods that are subsequently returned.
Use our GST percentage calculator to find out your GST. Easy, fast, and reliable online GST calculator.
Filing Integrated Goods and Services Tax (IGST) Returns
Registered taxpayers must file a monthly GSTR-3B return, which includes details of all outward supplies made during the month. The IGST liability payable for the month is also calculated in the GSTR-3B return.
Due Dates and Processes
The due date for filing GSTR-3B returns is the 20th of the following month. For example, the GSTR-3B return for the month of October must be filed by November 20th.
To file a GSTR-3B return, taxpayers must log in to the GST portal and enter the required details. Once the return is submitted, the IGST liability payable must be paid online.
Common Mistakes to Avoid
Here are some common mistakes to avoid when filing GST returns:
- Filing the return late
- Filing the return with incorrect information
- Not paying the IGST liability payable on time
Things to Keep in Mind About Integrated Goods and Services Tax
Here are some things to keep in mind about IGST:
- IGST is a destination-based tax, which means that it is collected by the supplier and paid to the government of the consuming state.
- IGST is a single tax that subsumes all other central and state indirect taxes, such as excise duty, VAT, and service tax.
- IGST is levied on both goods and services.
- IGST is charged on the transaction value of the goods or services, which includes the basic price, freight, insurance, customs duty, and any other charges.
Understanding these aspects of IGST is crucial for businesses navigating the complexities of interstate trade and compliance under GST. For businesses looking to ensure seamless operations and compliance, understanding registration under GST is essential.
FAQs on IGST
What exactly is IGST and how does it differ from CGST and SGST?
Integrated Goods and Services Tax (IGST) is a tax levied on all inter-state supplies of goods and services in India. It is a single tax that subsumes all other central and state indirect taxes, such as excise duty, VAT, and service tax.
CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) are levied on intra-state supplies of goods and services. CGST is collected by the central government and SGST is collected by the state government.
Why was the IGST model introduced in the Indian taxation system?
The IGST model was introduced in the Indian taxation system to eliminate cascading taxation, which is the double taxation of goods and services that are passed through multiple supply chains. It also aims to promote the ease of doing business by simplifying the tax compliance process.
How are IGST rates determined for various goods and services?
IGST rates are determined by the GST Council, which is a joint forum of the central and state governments. The IGST rates are generally equal to the sum of the CGST and SGST rates.
Are exports subjected to IGST, and how are they treated?
Exports are zero-rated under IGST, which means that no tax is payable on exports. However, exporters can claim a refund of IGST paid on inputs used in the manufacture or export of goods and services.
How can businesses claim a refund or credit for IGST paid on inputs?
Businesses can claim a refund or credit for IGST paid on inputs by filing a GSTR-3B return. The refund or credit can be used to offset future IGST liability or can be withdrawn in cash.
If I have excess IGST credit, can it be utilized against CGST or SGST liabilities?
Yes, excess IGST credit can be utilized against CGST or SGST liabilities. However, the taxpayer will need to file a GSTR-1 return to transfer the excess IGST credit to their CGST or SGST liability.
Are there any exemptions or rebates available under IGST?
Yes, there are a number of exemptions and rebates available under IGST. For example, certain goods and services are exempt from IGST altogether, while others are subject to a lower tax rate. Taxpayers can refer to the GST website for a detailed list of exemptions and rebates.
How often do businesses need to file IGST returns, and what's the process?
Businesses need to file a monthly GSTR-3B return, which includes details of all outward supplies made during the month. The IGST liability payable for the month is also calculated in the GSTR-3B return.
To file a GSTR-3B return, taxpayers must log in to the GST portal and enter the required details. Once the return is submitted, the IGST liability payable must be paid online.
Has the introduction of IGST impacted the cost of goods and services for the consumer?
The introduction of IGST has had a mixed impact on the cost of goods and services for the consumer. On the one hand, the elimination of cascading taxation has led to lower prices for some goods and services. On the other hand, the higher IGST rates on some essential goods and services have led to higher prices for consumers.
What penalties or consequences exist for non-compliance or incorrect filing under IGST?
There are a number of penalties and consequences for non-compliance or incorrect filing under IGST. These include late filing penalties, interest on late payments, and even imprisonment in certain cases.
How do I track IGST refund status?
To track IGST refund status, taxpayers can log in to the GST portal and go to the Refunds section. The status of all pending refund requests can be viewed on this page.
Read More
