Integrated GST (India) -IGST: Analysis

By | October 15, 2016
(Last Updated On: October 15, 2016)


Levy and Collection of Tax Under IGST

Key Points about Integrated GST /IGST

  • Chapter III of the Model IGST Law (THE INTEGRATED GOODS AND SERVICES TAX ACT, 2016 provides for levy and collection of tax (IGST)
  • Section 4 is the charging section for levy of IGST {  corresponding to section 6 of CST Act, 1956 } dealing with liability to tax on inter-state sales.The levy of tax on supply of goods and / or services is in two parts in the hands of the –
    • (i) Supplier; and
      (ii) Recipient of goods and / or services under the reverse charge mechanism.
    • This Section also specifies that supply of certain notified or scheduled (schedule yet to be
      specified), goods and / or services will be exempt from payment of taxes)
  • “Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-State trade or commerce.
    • Explanation 1.- A supply of goods and/or services in the course of import into the
      territory of India shall be deemed to be a supply of goods and/or services in the course
      of inter-State trade or commerce.
    • Explanation 2.- An export of goods and/or services shall be deemed to be a supply of
      goods and/or services in the course of inter-State trade or commerce.
  • A supply of goods and/or services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States. (Section 3(1) and 3(2) of the IGST Act)
  • IGST would be broadly CGST plus SGST and shall be levied on all inter-State taxable supplies of goods and services. Rate of IGST shall be as per Schedule to the Act (yet to be prescribed)
  • IGST shall be collected in the prescribed manner for which rules shall be prescribed.
  • The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, (Integrated Goods and Service Tax) , CGST (Central Goods and Service Tax) , and SGST (Sate Goods and Service Tax) on his purchases.The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of IGST will be done using the following hierarchy

    o First available ITC of IGST shall be used for payment of IGST;

    o Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment of IGST;

    o If both ITC of IGST and ITC of CGST are exhausted, then only the dealer would be permitted to use ITC of SGST for payment of IGST

    Remaining IGST liability, if any, shall be discharged using payment in cash. GST System will ensure maintenance of this hierarchy for payment of IGST using the credit.

  • IGST shall be payable by every taxable person. As per IGST Act, who is a taxable person is defined in section 9 of CGST Act, i.e., a person who carries on any business at any place in India and who is registered or required to be for payment of tax.
  • Section 27 of the IGST Act provides that various provisions as mentioned therein shall apply under IGST Act as they apply in relation to levy under the CGST Act.
  • Payment of IGST shall be made by service receiver in cases where it is notified that IGST is payable under reverse charge basis. In such cases, service receiver shall be treated as if he is person liable for paying IGST in relation to such service.
  • There will be certain exemptions subject to conditions if any, in relation to supply of specified goods or service which or services which will be specified in Schedule to Act, i.e., on such supplies, no tax shall be payable.
  • It may be noted that sub-section (1) on levy of IGST shall be subject to provisions of sub-section (3) and (4) as these are over riding provisions.Sub-section (3) which provides for payment of IGST under Reverse Charge Mechanism (RCM) provides that reverse charge shall apply subject to the following –
    • GST Council shall have to recommend the RCM.
    • Central Government shall notify the RCM by way of a notification after GST Council has recommended
    • RCM may be notified for specified categories of supplies of goods and / or services
    • In RCM, tax shall be paid by the person receiving such goods and/ or services
    • In RCM, all the provisions of IGST Act shall apply to such person as if he is the person liable for paying the tax in relation to such goods and / or services

Sub-section (4) provides for exemption from payment of IGST by way of a notification. Central Government may notify that no tax shall be payable by any taxable person in respect of such supplies of goods and / or services as specified in the Schedule (to be provided) in the Act. Such exemption may be subject to such conditions as may be notified.

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