The full form of IGST in GST law is Integrated Goods and Services Tax. It was introduced in 2017 and is also known as IGST Act 2017.
IGST Model is one of the integral components of GST Services Law and provides meaning to the GST Act. The IGST Act states that Central Government can levy IGST on the transactions occurring interstate. IGST is a sum of CGST and SGST which is levied on all inter-state transactions involving taxable goods and services across state lines with appropriate provisions for consignment or stock transfers of goods and services.
IGST is levied on the supply of goods or services taking place in the course of inter-state trade or commerce.
Interstate trade or commerce, therefore, includes
- Supplies made as – Inter-state trade or commence
- Imports made in Indian territory (deemed to be inter-state)
- or Exports (deemed to be inter-state)
When the central government is done with tax collection it divides the collected revenues among the respective states. This concept can be explained with the help of an example. If a trader from West Bengal sells goods worth 5000 INR to a Karnataka-based customer, then this tax will be levied on this interstate transaction and IGST will be levied on it.
If the tax rate on sold goods is 18%, then the West Bengal trader will levy a 900 INR charge as tax amount, which will sum the bill amount to 5900 INR. West Bengal traders will pay this 900 INR tax amount to the central government.
Commencement of the IGST Act
India implemented the 101st Amendment to the Indian Constitution on 1 July 2017, bringing the tax into effect. All indirect taxes were consolidated into one with the GST, which replaced multiple taxes imposed by both the national and state governments. The indirect taxation system for supply and demand was simplified through the implementation of GST.
Through the IGST (Amendment) Act, 2018, the IGST Act, 2017 has been amended and notified by the government through a notification dated 12/04/2017. The following law and regulations govern the commencement dates of various sections and provisions in the respective IGST/ Amendment Acts as required: Finance Act, 2019, Finance Act, 2020, Finance Act, 2021, as well as various Notifications issued by the Government/ CBIC on a regular basis.
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Advantages of the IGST Act
IGST model is a simple model with transparent functionality. It helps in maintaining Tax neutrality in the country. As it does not involve complex procedures, anyone can manage it easily. There is also no need for physical verification of the documents as all the data is easily accessible on the GSTN server. The payment of tax in the IGST Act is free from any manipulations or arguments as it is done on an online platform in an easy manner. Now it has become easier to manage Business to Business(B2B) model as well as Business to customer(B2C) transactions.
IGST Model has removed all the barriers in claiming a refund as well, as now ITC will be provided during the next tax payment. Now it has become simple & easy for taxpayers to pay taxes and it has also increased the efficiency of the indirect taxation system. IGST has made the accounting uncomplicated and lessened the load on the citizens. Since interstate transactions will not be taxed twice, interstate trade will definitely benefit. In contrast to the former tax laws, if you purchased goods from Chennai, you had to pay tax there, and then again in the state where you ultimately sold them. Consequently, the tax burden is reduced, which helps traders increase their interstate trade.
