IGST

IGST – Integrated Tax under GST

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
1If the supply entails the movement of goods, whether by the supplier, recipient or any other personDestination of supply of goods
2Delivery of goods to the recipient or any person as per the discretion of a third person through the transfer of title or other meansThe third person, as it is deemed that the third person has received the goods
3Movement of goods either by the supplier or recipientThe place of destination of supply
4If the goods are assembled or installed at the site.The place where the goods were assembled or installed
5Goods supplied onboard a conveyance like a vessel, aircraft, train or motor vehicleThe place of destination of supply
6If the place of supply cannot be ascertainedIt shall be determined in the manner as prescribed

Place of Supply of Goods – Imports and Exports

S. No.Nature of Supply of GoodsPlace of Supply
1ImportLocation of the Importer
2ExportLocation 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
1Immovable property pertaining to servicesLocation of the recipient
2Restaurant and catering, personal grooming, fitness, beauty treatment and health servicesThe location of performance of service
3Training and performance appraisal

1.       Location of the registered person (for B2B supplies)

2.       Location of the performance of service (for B2C supplies)

4Admission to an event or amusement parkThe location of the event or the location of the park or affiliated places
5Organization 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)

6Transportation of goodsSame as above
7Passenger 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)

 

8Services on board a conveyanceLocation of the initial scheduled point of departure of the conveyance for the particular voyage
9Banking and other financial servicesThe 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
10Insurance Services

1.       Location of such person (for B2B supplies)

2.       Location of the recipient of services as per the records of the supplier

11Advertisement and services to the GovernmentThe place of supply will be taken as located in each of such states
12Telecommunication 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 SupplyPlace of Supply
1B2BLocation of such registered person
2B2C

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
1Supply 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
2Services supplied to individuals, the likes of which requires the physical presence of the receiverThe location of performance of the service
3Services connected with immovable propertyThe location of immovable property
4Admission to or organization of an eventThe 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 territoryThe location in the taxable territory where greater proportions of the service were provided
5(2)In multiple statesEach of the states. The levy will be based on the quantum of services provided to these states.
6Banking, financial institutions, NBC Intermediary services, the hiring of vehicles, and other affiliated servicesThe location of the supplier
7Transportation of goodsThe destination of supply
8Passenger transportationThe location where the passenger embarks on the conveyance for a continuous journey
9Services onboard a conveyanceThe first scheduled point of departure of their conveyance for the journey
10Online information and database access or retrieval servicesThe location of the recipient

 Default Provision for Other Services

S. No.Nature of Supply Place of Supply
1AnyLocation 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
1If the location of the supplier is in territorial watersThe location of the supplier
2If the destination of supply is in territorial watersThe 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.

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Post by Sreeram Viswanath

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