The Government of India rolled out the Goods and Service Tax Act on 1st July 2017. The main aim of the Goods and Service Tax act was to bring a unified taxation system throughout the country concerning indirect taxes.
With GST coming into force, many indirect taxes that existed then were replaced and came to be contained under it, such as Value Added Tax, Service Tax, Central Sales Tax, Luxury Tax, etc.
GST was further divided into
- The Central Goods and Service Tax Act, 2017 (CGST)
- The Integrated Goods and Service Tax Act, 2017 (IGST)
- The Union Territory Goods and Service Tax Act, 2017 (UTGST)
- The Goods and Service Tax (Compensation to States) Act, 2017 (Compensation Cess)
Further below, we will have a deep insight into IGST.
What is Integrated Goods and Service Tax?
Integrated Goods and Service Tax is a type of GST levied on inter-state supply of goods or services or both. It does not apply to the supply of alcoholic liquor for human consumption.
Integrated Tax on goods imported into India is charged according to the Customs Tariff Act, 1975. Section 5 of the IGST Act provides for the charging, levy and collection of integrated tax.
Rates Under IGST
The rate equal to IGST will be equal to CGST charged. The maximum rate of IGST cannot be more than 40%. At present, the highest rate of IGST is 28%.
Inter-state supply of goods or services means a supply of goods or services or both from a state to any other place outside it.
A supply is an inter-state supply when in the following situations –
1. When the place of supplier and the place of a recipient are in two different states.
2. When the place of supplier and the recipient is in two different union territories, or
3. When one of them, i.e. the supplier or the recipient, is located in a state and another is located in a union territory.
4. When the supplier of goods or services or both is located in India, but the supply is made to a place outside India.
5. When a supply of goods or services or both is made by an SEZ unit or developer to a non-SEZ unit or developer.
6. Supply to any taxable place that is not considered an intra-state supply is regarded as inter-state supply.
To sum up the above, what type of GST shall be applicable on a transaction shall be determined through its place of supply. When any supply is an inter-state, CGST + IGST shall be applicable. For the transactions that happen within the same state or union territory but are considered inter-state supplies, CGST + IGST shall be applicable.
To determine whether IGST is applicable or not, two important things are to be considered,
1. Location of supplier
2. Place of supply
Location of Supplier
Location of Supply means,
1. Where a place of business is registered, and supply is made from that place of business.
2. A place from which supply is made which is not a place of business registered as mentioned above, but it is a fixed establishment somewhere else.
3. Where a supply is made from more than one establishment, viz; the place of business or fixed establishment, the place which is most directly concerned is to be considered as the location of the supplier.
4. In the absence of any of the above, the place of residence of the supplier is to be considered as the location of the supplier.
Place of Supply
Place of supply is the place where goods or services are or are deemed to be supplied. Delivery is when the recipient acknowledges the supply made.
Provisions for the inter-state supply of goods are described under Section 10 of the IGST Act, and the provisions for inter-state supply of services are mentioned under Section 12 of the IGST Act.
There is no limit for turnover for inter-state supplies. Hence, any person making any outward supplies inter-state has to register himself compulsorily.
Normally, GST is payable by the supplier of goods or services, but in some cases, it is to be paid by the recipient; i.e. the liability to pay tax is on the recipient rather than what is generally on the supplier.
Such situations are termed as a reverse charge.
Import of Goods
Goods supplied into India during imports are considered inter-state supplies until they don’t cross the respective customs frontier, and IGST is payable along with basic customs duties and surcharges, as applicable.
Import of Services
Services availed from any place outside India is an import of services.
Import of services made for a consideration, irrespective of whether it is made during furtherance of business or not, is to be considered inter-state supplies. Hence, IGST will be charged.