IGST Act, 2017

IGST Act, 2017

The Integrated Goods and Services Tax (IGST) Act, 2017 governs the tax levied on interstate trade of goods and services in India. It is a crucial part of the Goods and Services Tax (GST) regime, which was implemented to unify multiple indirect taxes into a single tax system, ensuring a streamlined and uniform tax structure across the country.

Key Features of the IGST Act, 2017:

1. Levy and Collection of IGST:

   • IGST is levied on all interstate supplies of goods and services. This includes imports into India.
   • The tax is collected by the Central Government but shared between the Centre and the State where the consumption occurs.

2. Applicability:

   • Interstate Transactions: IGST is applicable when the supply of goods or services takes place between two states or Union Territories.
   • Imports: On imports into India, IGST is charged, combining customs duties and GST to ensure that imported goods or services are taxed similarly to domestic products.

3. Input Tax Credit (ITC):

   • ITC is available under the IGST regime. A supplier can claim a credit for the taxes paid on inputs against the IGST payable on the output.

4. Determination of Supply:

   • Interstate Supply: When the supplier and the place of supply are in different states, IGST is applicable.
   • Intrastate Supply: If the supplier and place of supply are in the same state, Central GST (CGST) and State GST (SGST) are levied instead of IGST.

5. Exports:

   • Exports are zero-rated under the GST law. This means that no tax is payable on export sales, and input taxes can be claimed as a refund.

6. Reverse Charge Mechanism (RCM):

   • Under RCM, the liability to pay tax is shifted from the supplier to the recipient of goods/services. It applies to certain notified goods/services and unregistered suppliers.

7. Place of Supply:

   • The place of supply provisions determine whether a supply is classified as interstate or intrastate. These rules vary depending on whether the supply is of goods or services, as well as the type of transaction (e.g., sale of goods, transportation, telecommunications, etc.).

Important Sections of the IGST Act:

1. Section 5: Levy and Collection of IGST

   • Specifies how IGST will be levied on all supplies in the course of interstate trade or commerce.

2. Section 6: Power to Grant Exemption

   • The Central Government can grant exemptions from IGST for specific goods or services.

3. Section 12: Place of Supply of Goods

   • Provides rules for determining the place of supply for goods in interstate transactions.

4. Section 13: Place of Supply of Services

   • Rules for determining the place of supply for services, which vary depending on whether the supplier and recipient are within India or one is located outside India.

5. Section 16: Zero-Rated Supply

   • Deals with the provisions related to zero-rating of exports and how taxpayers can claim refunds on exports.

6. Section 20: Application of Provisions of Central Goods and Services Tax Act (CGST Act), 2017

   • The provisions of the CGST Act apply to IGST, unless specifically overridden by the IGST Act.

IGST Rates:

• The tax rates under IGST vary based on the type of goods or services supplied. The common IGST rates are 0%, 5%, 12%, 18%, and 28%.

Benefits of IGST:

1. Prevention of Cascading Taxes: By allowing input tax credit, IGST ensures that there is no tax on tax, thereby reducing the cascading effect of multiple taxes.
2. Ease of Compliance: With a unified tax system, businesses dealing in interstate trade have a single mechanism for tax payments and filings.
3. Uniform Taxation: IGST ensures the same tax rate across states, which helps reduce economic disparities among regions.

Role of IGST in the GST Structure:

• IGST is a pivotal element in the GST system as it facilitates the smooth movement of goods and services across state boundaries.
• It also ensures that the revenue generated from interstate transactions is appropriately divided between the central and state governments.