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Overview of IGST Act

Integrated Goods and Services Tax Act:

IGST Act is small but very important Act. It can be compared with Central Sales Tax Act. ‘Integrated tax’ means the integrated goods and services tax levied under Integrated Goods and Services Tax Act - section 2(12) of IGST Act.

The IGST Act carries important definitions relating to export and import of goods, export and import of services, location of supplier and recipient of services, taxable territory and zero rated supply [section 2 of IGST Act]. As per Article 246A(2) of Constitution of India as amended w.e.f. 16-9-2016, Parliament will have exclusive powers to make laws with respect of goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Under this constitutional authority, section 5(1) of IGST Act imposes tax on inter-State supply.

Section 5(3) of IGST Act make provisions in respect of reverse charge in case of notified services. Section 5(4) of IGST Act provides for reverse charge when supplies are received from registered person.

Parliament may, by law, formulate principles for determining:

a) Place of supply of goods or services

b) When supply of goods or services or both are in the course of inter-State trade or commerce - Article 269A(2) of Constitution of India inserted w.e.f. 16-9-2016. Under this constitutional authority -

  • Sections 7,8 and 9 define inter-State and intra-State supply

Section 15 of IGST Act makes provision for refund of IGST to international tourists. Section 16 of IGST Act defines export and supplies to SEZ as ‘zero rated supply’. As per Article 296A(1) (inserted w.e.f. 16-9-2016), IGST collected by Union will be appointed between Union and States as per law made by Parliament on the recommendation of GST Council. Sections 17 and 18 of IGST Act make provisions for such appointment under this constitutional authority. Section 20 of IGST Act provides that provisions of CGST Act shall mutatis mutandis apply to IGST Act.

Nature of IGST Act:

IGST (Integrated GST) is payable on supply of goods or services or both in inter-State supplies. IGST is intermediary tax mainly on B2B (Business to Business) transactions. It is not envisaged as final tax as input tax credit of IGST will be available to recipient in another State. If IGST is paid on B2C transaction (Business to Customer), the State where goods or services or both are consumed will get their share of SGST.

IGST rate is double the CGST rate and will be uniform all over India. It will ensure that goods or services or both and taxes move together across the country, which will ensure seamless and tax free movement of goods and services within the country. 

In view of IGST, there will be no need to claim refund of input taxes, except in case of physical exports and supplies to SEZ. Refund is also permissible in case of inverted duty structure i.e. tax on output is less than tax payable on inputs and input goods (except in few cases). Exports and supplies to Special Economic Zones (SEZ) are zero rated i.e. input tax credit will be available even if tax is not paid on output. This will make exports and supplies to SEZ really tax free.

IGST concept of ‘supply’ instead of sales and removal of distinction between goods and services are game changers in GST. It is a unique concept nowhere else been tried in the world.

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Disclaimer: This information is updated till 29 April 2019.

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