IGST - What is Integrated Goods and Services Tax? All You Need to Know

Integrated Goods and Services Tax (IGST) is a type of indirect tax levied on the interstate supply of goods and services in India. It was introduced by the Indian government as part of the Goods and Services Tax (GST) system, which was implemented on 1 July 2017, with the aim of creating a unified tax structure across the country.IGST is collected by the central government and is distributed to the states where the goods or services are consumed. It is applicable to all transactions involving the movement of goods or services from one state to another or from a Union Territory to a state. In other words, it is a tax collected by the central government on goods and services that are supplied from one state to another state or union territory.The IGST is calculated as the sum of the central GST (CGST) and the state GST (SGST), and is levied at the rate of the destination state.

Integrated Goods and Services Tax is a tax levied on the supply of goods and services between two different states or union territories in India. The key features of IGST are as follows:

1. Applicability: IGST is applicable on all inter-state supplies of goods and services in India, including imports and exports.
2. Destination-based tax: IGST is a destination-based tax, which means that the tax is levied at the place where the goods or services are consumed, rather than where they are produced. This ensures that the tax revenue goes to the state where the consumption occurs.
3. Payment of IGST: The IGST payment is made by the recipient of the goods or services, and is collected by the supplier. The supplier then pays the IGST to the government.
4. Input tax credit: Businesses can claim input tax credit for IGST paid on inter-state supplies of goods and services. This helps to avoid the cascading effect of taxes and ensures that the tax burden is not passed on to the end consumer.
5. Compliance: IGST is administered by the GSTN (Goods and Services Tax Network) and is governed by the GST Council. Businesses must comply with the GST regulations and file regular returns to ensure proper payment of IGST.

CGST, SGST, and IGST are three types of taxes that are implemented in India as part of the Goods and Services Tax (GST) system.CGST stands for Central Goods and Services Tax, and it is a tax that is levied by the central government on the supply of goods and services within a state. SGST stands for State Goods and Services Tax, and it is a tax that is levied by the state government on the supply of goods and services within the state.IGST stands for Integrated Goods and Services Tax, and it is a tax that is levied by the central government on the supply of goods and services between two different states or union territories.When a product or service is sold within a state, both CGST and SGST are levied, with the revenue being split between the central and state governments. Let’s understand better with the help of an example in the next part.The implementation of CGST, SGST, and IGST is done through the GST Network (GSTN), which is a common platform for GST implementation in India. Businesses that are registered under GST are required to file their tax returns online through the GSTN portal, and the tax payment is made electronically through the portal as well. The GSTN system helps ensure that the taxes are collected efficiently and transparently, and it also helps reduce the burden of compliance for businesses. Also Read - What is Goods and Service Tax (GST) in India?

IGST is a tax collected by the central government on goods and services that are supplied from one state to another state or union territory.

To understand IGST better, let's consider an example:

Suppose a manufacturer in Maharashtra supplies goods worth ₹1,00,000 to a dealer in Gujarat. In this case, IGST will be levied on this transaction. Let's assume the IGST rate is 18%. Then the IGST levied on this transaction would be: IGST = (Value of goods * IGST rate) / 100 = (₹1,00,000*18) / 100= ₹18,000The manufacturer in Maharashtra will collect this IGST from the dealer in Gujarat and deposit it with the central government. The IGST collected will be used to compensate both the central and the state governments where the goods and services are consumed.In the GST system, IGST is levied only on interstate transactions. For intrastate transactions, the state GST (SGST) and central GST (CGST) are levied separately. The SGST is collected by the state government, and the CGST is collected by the central government.Overall, the GST system aims to simplify the taxation process in India and make it more transparent and efficient.

Under the GST regime in India, IGST is a tax that is levied on the inter-state supply of goods and services. IGST is essentially a combination of CGST and SGST, and it is collected by the centre for transactions that take place between two states.

The mechanism for taxing IGST under GST is as follows:

1. When goods or services are supplied from one state to another state, the seller charges IGST on the transaction value.
2. The IGST amount collected by the seller is deposited with the Central Government.
3. The Central Government then distributes the IGST amount to the state where the goods or services have been consumed.
4. If the recipient of the goods or services is registered under GST, they can claim a credit for the IGST paid on their purchases against the IGST payable on their sales.

In summary, IGST is taxed on inter-state transactions under GST, and the tax collected is distributed between the centre and the states involved in the transaction.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.