IGST - Integrated Tax under GST

India’s GST is levied in three forms, namely Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST) and Integrated Goods and Services Tax (IGST). While CGST and SGST are levied on the intra-state supply of goods and/or services, the latter is levied on the inter-state supply of goods and/or services. In addition to it, IGST is levied on the import and export of goods and/or services. Akin to CGST and unlike SGST, this form of tax is entirely collected by the Central Government. The article explores the provisions pertaining to integrated tax under GST.

CST and IGST – a Comparison

Under the previous tax regime, inter-state trade or commerce was regulated by the Central Sales Tax Act, 1956 wherein the taxes were collected and retained from the state of dispatch of goods and/or service, or in other words, the state of manufacture of goods. This was against the norm of indirect tax, wherein taxes are levied on the consumer. Factors such as the cascading of taxes in the absence of Input Tax Credit (ITC), increasing compliance costs due to the filing of various accounting forms, etc., complicated the tax system of those days. Here’s how IGST has changed it:

• IGST, in contrast to CST, is a destination-based tax. As a result, the SGST component accrues to the State of the consumer.
• The tax system maintains the integrity of ITC chains in inter-state supplies.

Inter-State Supply

A supply of goods and/or services is classified as inter-state if the location of the supplier and the place of supply are in two different states; two different union territories; or in case of a transaction between a state and a union territory. Moreover, the import of goods into the country is also treated as inter-state trade or commerce.

Export of Services

A supply is considered as an export if:

• The supplier of service is located in India.
• The recipient of service is located outside India.
• The place of supply of service is located outside India.
• The payment of such services has been received by the Indian supplier in convertible foreign exchange.
• The supplier of services and the recipient of services are not mere establishments of a distinct person.

Import of Services

A supply is classified as an import if:

• The supplier of the service is located outside India.
• The recipient of the service is located in India.
• The place of supply of service is in India.

Wonder how to calculate IGST on imports? Here's your guide.

Location

For tax purposes, the location of a supplier could be a registered place of business or a fixed establishment of the supplier. To qualify as a location, a premise has to be either a regular place of business or a fixed establishment and must hold an essential degree of performance and suitable structure in terms of human and technical resources.

Place of Supply

The concept of place of supply stakes a vital claim in the realms of GST. Its provisions have been framed in accordance with the principle of destination or consumption. The provisions related to the place of supply of goods and services has been explained below:

Place of Supply of Goods – Domestic Supplies

S. No.	Nature of Supply	Place of Supply
1	If the supply entails the movement of goods, whether by the supplier, recipient or any other person	Destination of supply of goods
2	Delivery of goods to the recipient or any person as per the discretion of a third person through the transfer of title or other means	The third person, as it is deemed that the third person has received the goods
3	Movement of goods either by the supplier or recipient	The place of destination of supply
4	If the goods are assembled or installed at the site.	The place where the goods were assembled or installed
5	Goods supplied onboard a conveyance like a vessel, aircraft, train or motor vehicle	The place of destination of supply
6	If the place of supply cannot be ascertained	It shall be determined in the manner as prescribed

Place of Supply of Goods – Imports and Exports

S. No.	Nature of Supply of Goods	Place of Supply
1	Import	Location of the Importer
2	Export	Location of the exporter

Place of Supply of Services – Domestic Supplies

For the awareness of the taxpayers, the place of supply of the below-listed services is determined with reference to a proxy, while the likes of the remaining are governed by a default provision.

S. No.	Nature of Service	Place of Supply
1	Immovable property pertaining to services	Location of the recipient
2	Restaurant and catering, personal grooming, fitness, beauty treatment and health services	The location of performance of service
3	Training and performance appraisal	1.       Location of the registered person (for B2B supplies) 2.       Location of the performance of service (for B2C supplies)
4	Admission to an event or amusement park	The location of the event or the location of the park or affiliated places
5	Organization of an event	1.       Location of the registered person (for B2B supplies) 2.       Location at which such goods were dispatched for transportation (for B2C supplies)
6	Transportation of goods	Same as above
7	Passenger transportation	1.       Location of the registered person (for B2B supplies) 2.       Place where the passenger boards the conveyance for a continuous journey (for B2C supplies)
8	Services on board a conveyance	Location of the initial scheduled point of departure of the conveyance for the particular voyage
9	Banking and other financial services	The location of the recipient as per the records of the supplier. In the absence of such records, the location of a supplier will be considered as the place of supply
10	Insurance Services	1.       Location of such person (for B2B supplies) 2.       Location of the recipient of services as per the records of the supplier
11	Advertisement and services to the Government	The place of supply will be taken as located in each of such states
12	Telecommunication services	1.       For mobile/internet post-paid services – the billing address of the recipient 2.       For sale of pre-paid voucher – the place of sale of such vouchers 3.       In other cases – the address of the recipient

The Default Provision for Domestic Services

The following services qualify for a default provision.

S.NO.	Nature of Supply	Place of Supply
1	B2B	Location of such registered person
2	B2C	1.       Location of the registered person if the address on record exists 2.       If not, the location of the supplier of services

Place of Supply – Cross-Border Supplies

Here again, the place of supply for the below-listed services is determined with reference to proxy, while the rest are governed by a default provision.

S. No.	Nature of Service	Place of Supply
1	Supply of service for goods which needs to be made physically available from a remote location through electronic means (except for those goods that are temporarily imported into India for repairs and exported)	The location of performance of service or the location where the goods are held
2	Services supplied to individuals, the likes of which requires the physical presence of the receiver	The location of performance of the service
3	Services connected with immovable property	The location of immovable property
4	Admission to or organization of an event	The location of the event
5	If the following services are supplied at multiple locations (explained individually below): ·         Goods and individual related. ·         Immovable property related. ·         Event-related
5 (1)	At multiple locations, including that of a taxable territory	The location in the taxable territory where greater proportions of the service were provided
5(2)	In multiple states	Each of the states. The levy will be based on the quantum of services provided to these states.
6	Banking, financial institutions, NBC Intermediary services, the hiring of vehicles, and other affiliated services	The location of the supplier
7	Transportation of goods	The destination of supply
8	Passenger transportation	The location where the passenger embarks on the conveyance for a continuous journey
9	Services onboard a conveyance	The first scheduled point of departure of their conveyance for the journey
10	Online information and database access or retrieval services	The location of the recipient

 Default Provision for Other Services

S. No.	Nature of Supply	Place of Supply
1	Any	Location of the recipient. In the absence of the recipient’s address, the location of the supplier.

Supplies in Territorial Waters

S. No.	Location of Supplier	Place of Supply
1	If the location of the supplier is in territorial waters	The location of the supplier
2	If the destination of supply is in territorial waters	The coastal state or union territory where the nearest point of the appropriate baseline is located

Cross-Utilization of Credits

Cross-utilization is a mechanism wherein the credits of a tax component is utilized against the other. With respect to GST, the sum of ITC on account of IGST could be utilized for the remittance of IGST, CGST and SGST respectively. Likewise, the sum of ITC on account of CGST could be utilized for the remittance of CGST (but not SGST) and IGST respectively. Also, the sum of ITC on account of SGST could be utilized for the remittance of SGST (but not CGST) and IGST respectively.

Zero Rated Supply

Zero-rated supplies refer to the exports and supplies to Special Economic Zones (SEZ’s), the likes of which are tax exempt. However, the provision of ITC is allowed, provided that the prescribed conditions, safeguards and procedures are followed. Refunds on such supplies are claimable through any of the following options:

• By making supplies without the payment of IGST under bond and claiming the refund of unbilled ITC.
• By making supplies on the payment of IGST and claiming a refund of the same.

Refund of IGST on Supplies Made to Foreign Tourists

The integrated tax for foreign tourists follows a similar pattern to that of exports, given that an international tourist is considered as a non-resident of India who makes a visit to the country for a period not exceeding six months. The Indian tax laws facilitate the refund of IGST paid to an international tourist leaving India on goods being taken outside the country, subject to the prescribed conditions and safeguards. Know more.

Refund on Mistaken Payment

Taxpayers who have remitted payments to another tax head, i.e., SGST or CGST instead of IGST and vice versa, would be refunded. Such taxpayers must make a re-deposit of the sum in the respective tax head. Know more.