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IGST

IGST is levied on inter-state supply of goods and services in India. Unlike CGST and SGST which are levied on intra-state supplies, IGST is collected by the Central Government but the SGST component accrues to the state where the consumer is located. This makes IGST a destination-based tax. Under the previous CST regime, taxes were collected by the origin state, creating compliance issues and cascading taxes without ITC. IGST addresses these problems.

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232 views5 pages

IGST

IGST is levied on inter-state supply of goods and services in India. Unlike CGST and SGST which are levied on intra-state supplies, IGST is collected by the Central Government but the SGST component accrues to the state where the consumer is located. This makes IGST a destination-based tax. Under the previous CST regime, taxes were collected by the origin state, creating compliance issues and cascading taxes without ITC. IGST addresses these problems.

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IGST

India’s GST is levied in three forms, which are:

 Central Goods and Services Tax (CGST)


 State Goods and Services Tax (SGST)
 Integrated Goods and Services Tax (IGST)

CGST and SGST are levied on the intra-state supply of goods and/or services and IGST is
levied on the inter-state supply of goods and/or services. In addition to it, IGST is also
levied on the import and export of goods and/or services. Similar to CGST but unlike
SGST, IGST is entirely collected by the Central Government.

Comparing Central Sales Tax and IGST:


Under the previous tax regime, inter-state movement of goods/services was regulated
by the Central Sales Tax Act, 1956 wherein the taxes were collected and retained from
the state of dispatch of goods and/or service. This was against the norm of indirect tax,
wherein taxes should be levied on the consumer. Due to this, the tax system got
complicated as there was cascading of taxes in the absence of Input Tax Credit (ITC) &
increasing compliance costs due to the filing of various accounting forms.

This changed under GST regime as IGST, in contrast to CST, is a destination-based tax.
As a result, the SGST component accrues to the State of the consumer. Also, the tax
system maintains the integrity of ITC chains in inter-state supplies which reduces the
complexity and cascading effect.

Inter-State Supply
A supply of goods and/or services is classified as inter-state if the location of the
supplier and the place of supply are in two different states; two different union
territories; or in case of a transaction between a state and a union territory. Moreover,
the import of goods into the country is also treated as inter-state trade or commerce.

Export of Services
A supply is considered as an export if:

 The supplier of service is located in India.


 The recipient of service is located outside India.
 The place of supply of service is located outside India.
 The payment of such services has been received by the Indian supplier in
convertible foreign exchange.
 The supplier of services and the recipient of services are not mere
establishments of a distinct person.
Import of Services
A supply is classified as an import if:

 The supplier of the service is located outside India.


 The recipient of the service is located in India.
 The place of supply of service is in India.

Location
For tax purposes, the location of a supplier could be a registered place of business or a
fixed establishment of the supplier. To qualify as a location, a premise has to be either a
regular place of business or a fixed establishment and must hold an essential degree of
performance and suitable structure in terms of human and technical resources.

Place of Supply
Place of supply of goods under GST defines whether the transaction will be counted as
intra-state or inter-state, and accordingly levy of SGST, CGST & IGST will be determined.

Place of Supply When There is Movement of Goods

Example 1- Intra-state sales


Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of Nagpur,
Maharashtra
The place of supply is Nagpur in Maharashtra. Since it is the same state CGST & SGST
will be charged.
Example 2-Inter-State sales
Mr. Raj of Mumbai, Maharashtra sells 30 TV sets to Mr. Vinod of Bangalore,
Karnataka
The place of supply is Bangalore in Karnataka. Since it is a different state IGST will be
charged.
Example 3- Deliver to a 3rd party as per instructions
Mr. Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The
buyer requests the seller to send the goods to Nagpur (Maharashtra)
In this case, it will be assumed that the buyer in Lucknow has received the goods & IGST
will be charged.
Place of supply: Lucknow (UP)
GST: IGST

Example 4 – E-commerce sale


Mr. Raj of Mumbai, Maharashtra orders a mobile from Amazon to be delivered to
his mother in Lucknow (UP) as a gift. M/s ABC (online seller registered in Gujarat)
processes the order and sends the mobile accordingly and Mr. Raj is billed by
Amazon.
Similar to example 3, it will be assumed that the buyer in Mumbai has received the
goods & IGST will be charged.
Place of supply: Mumbai, Maharashtra
GST: IGST

No Movement of Goods

Example 1- No movement of goods


Sales Heaven Ltd. (Chennai) opens a new showroom in Bangalore. It purchases a
building for showroom from ABC Realtors (Bangalore) along with pre-installed
workstations
Place of supply: Bangalore
GST: CGST& SGST
There is no movement of goods (work stations), so the place of supply will be the
location of such goods at the time of delivery (handing over) to the receiver.

Imports & Exports


The place of supply of goods:

 Imported into India will be the location of the importer.


 Exported from India shall be the location outside India.
Example 1- Import
Ms. Malini imports school bags from China for her shop (registered in Mumbai)
Place of supply: Mumbai
GST: IGST
Example 2- Export
Ms. Anita (Kolkata) exports Indian perfumes to UK
Place of supply: Kolkata
GST: Exempted
References

1) https://www.indiafilings.com/learn/igst/
2) https://cleartax.in/s/place-of-supply-of-goods
3) https://www.legalraasta.com/gst/igst/
4) https://www.gstindia.com/gst-e-book-11-september-2017-edition/
5) https://en.wikipedia.org/wiki/Goods_and_Services_Tax_(India)

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