In this article, you will learn:
Let’s Understand GSTR 7 Filing Process in Detail
Under GST, a Dual GST model has been implemented keeping in mind the federal structure of India. As per this Model, both Centre and States would simultaneously charge GST on the supply of goods or services made within States or Union Territories (UTs).
In addition to the CGST and SGST component of GST, there is a third component known as the Integrated Goods and Services Tax (IGST). IGST was introduced to undertake inter-state trade of goods or services.
In this article you will learn, what is IGST, utilization of ITC under IGST and provisions with regards to IGST.
What is IGST?
IGST full form is Integrated Goods and Services Tax. It is a tax levied on inter-state trade of goods and services by the Central Government. Such a tax helps the government to control interstate trade of goods or services and ensure that the SGST component of GST goes to the consumer State.
Furthermore, it is governed by the IGST Act, 2017. Unlike the Central Sales Tax Act, 1956, which regulated the inter-state trade prior to GST, IGST would enable the recipients to claim ITC for the tax paid on the inputs.
IGST Act gives provision for levy and collection of tax on inter-State supply of
goods or services or both by the Central Government and for matters
connected therewith or incidental thereto.
BE it enacted by Parliament in the Sixty-eighth Year of the Republic of India as follows:—
CHAPTER I – PRELIMINARY
(1) IGST Act may be called the Integrated Goods and Services Tax Act, 2017.
(2) It shall extend to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of IGSTAct
and any reference in any such provision to the commencement of IGST Act shall be construed
as a reference to the coming into force of that provision
How can I track IGST refund Status
1) To track the status of refund for IGST and/ or Cess paid on account of Export of Goods after logging in to the GST Portal, perform the following steps.
2) Navigate to Services > Refunds > Track status of invoice data to be shared with ICEGATE command.
3) Select the Financial Year and Month from the drop-down list.
4) Click the SEARCH button.
5) The search results are displayed.
Applicability of IGST
Nature of supply in a given transaction determines the applicability of IGST under GST Law. Accordingly, there are two types of supplies under GST:
Intra-state supply refers to a supply where location of the supplier and place of supply are in the same state or Union Territory.
Furthermore, in case of such a supply of goods and services, a seller has to collect both CGST and SGST. After collecting both the taxes, the CGST part gets deposited with the Central Government. And the SGST portion gets deposited with the respective State Government.
Inter-State Supply refers to any supply where the location of the supplier and the place of supply are in:
- Two different States
- 2 Different Union Territories
- A State and a Union Territory
Additionally, any supply in a taxable territory, that is not an Intra-State supply is deemed to be an Inter-State supply. The following supplies are also treated as Inter-State supplies:
- Supplies to or by Special Economic Zones (SEZs)
- Goods or services imported to India
- Services or goods exported outside India
- Supply of goods or services to international tourists
Thus, on the Inter-State supply of goods or services, only IGST is levied and collected by the Central Government.
Location of Supplier
Location of the supplier is the registered place of business or the fixed establishment of the supplier from where the supply is made.
However, where the location of supplier or the place of supply is in territorial waters, the location of the supplier or the place of supply, as the case may be, would be taken as the coastal state or UT where the nearest point of appropriate baseline is located.
Place of Supply
There are separate provisions deciding the place of supply of goods or services under GST. Such provisions have been made considering the destination or the consumption principle.
In case of goods, it is easy to decide the place of supply as goods are tangible. Typically, place of delivery becomes place of supply in case of goods.
However, since services are intangible in nature, it is difficult to decide the place where the services are consumed.
Therefore, in respect of certain categories of services, place of supply of services is decided with reference to a proxy.
There are separate provisions for the supply of goods or services to determine the place of supply under GST.
These provisions are made under the following heads:
- Place of supply of goods other than import and export (Section 10)
- The place of supply of goods in case of import and export (Section 11)
- Place of supply of services in case of domestic supplies (Section 12) (Where location of supplier and the location of recipient of services is in India)
- The Place of supply of services in case of cross border supplies (Section 13) (Where location of the supplier or the location of the recipient of services is outside India)
Export or Import of Services
A supply is taken as export or import if the following conditions are satisfied.
In Case of Export of Services
A supply of service would be taken as export if:
- Supplier of such service is located in India
- Recipient of services is located outside India
- Place of supply of services is outside India
- Payment received by the supplier is in convertible foreign exchange
- Supplier and recipient of service are not establishments of distinct person
In Case of Import of Services
A supply of service is taken as import if:
- Supplier of service is located outside India
- Recipient of services is located in India
- Place of supply of services is in India
Zero Rated Supply
Exports and supplies made to SEZs are deemed as zero rated supplies. As per GST Law, no tax is payable on such supplies.
However, taxpayers can claim ITC on such supplies via the following two options:
- Supplies made under bond or LUT without the payment of IGST. In such a case, taxpayer can claim refund of unutilized ITC.
- The supplies made on payment of IGST. In this case, the taxpayer can claim IGST paid on zero rated supplies.
ITC Utilization Under GST
Initially, the ITC could be utilized in the following manner:
|CGST Liability||SGST Liability||IGST Liability|
|First, ITC on account of CGST is utilized||First, ITC on account of SGST is utilized||First, ITC on account of IGST is utilized|
|Then, ITC on account of IGST is utilized||Then, ITC on account of IGST is utilized||Then, ITC on account of CGST is utilized|
|Finally, ITC on account of SGST is utilized|
There was no rule that the ITC on account of IGST had to be completely exhausted first even before utilizing ITC on account of CGST and SGST. As per Circular No. 98/17/2019-GST issued on April 23rd, 2019, the government clarified the utilization of input tax credit of integrated tax in a particular order.
As per this rule, ITC of Integrated Tax can be utilized to pay output tax liability towards central and state tax in any order. However, this rule was subject to a condition that the entire ITC with regards to IGST must be first completely exhausted before utilizing the ITC with regards to Central tax or state tax.
The following table shows the order of utilization of ITC as per this circular:
|Input tax Credit on account of||Output liability on account of Integrated tax||Output liability on account of Central tax||Output liability on account of State tax / Union Territory tax|
|Integrated tax||(I)||(II) – In any order and in any proportion|
|(III) Input tax Credit on account of Integrated tax to be completely exhausted mandatorily|
|Central tax||(V)||(IV)||Not permitted|
|State tax / Union Territory tax||(VII)||Not permitted||(VI)|
Refund of IGST In Case Of Tourists Leaving India
Since international tourist has been categorized as a non-resident, the refund of IGST paid on goods provided to such a tourist leaving India can be claimed.