Overview of IGST Act
- Blog|GST & Customs|
- 2 Min Read
- By Taxmann
- Last Updated on 28 June, 2021
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
- Sections 10 to 13 of IGST Act make provisions of place of supply
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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