What is IGST

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What is IGST?

“Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-State trade or commerce.
As per section 2(c) of the act – “Integrated Goods and Services Tax” (IGST) means tax levied under this Act on the supply of any goods and/or services in the course of inter-State trade or commerce.
Explanation 1.- A supply of goods and/or services in the course of import into the territory of India shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.
Explanation 2.- An export of goods and/or services shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

Benefits of IGST:

  • Maintenance of uninterrupted ITC chain on inter-State transactions;
  • No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer;
  • No refund claim in exporting State, as ITC is used up while paying the tax;
  • Self-monitoring model;
  • Ensures tax neutrality while keeping the tax regime simple;
  • Simple accounting with no additional compliance burden on the taxpayer;
  • Would facilitate in ensuring high level of compliance and thus higher collection efficiency. Model can handle ‘Business to Business’ as well as ‘Business to Consumer’ transactions.

What are inter-state supplies?

A supply of goods and/or services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States.

PRINCIPLES FOR DETERMINING SUPPLY OF GOODS AND/OR SERVICES IN THE COURSE OF INTER-STATE TRADE OR COMMERCE

Section 3. Supplies of goods and/or services in the course of inter-State trade or commerce

(1) Subject to the provisions of section 5, supply of goods in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States.

(2) Subject to the provisions of section 6, supply of services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States.

Section 3A. Supplies of goods and/or services in the course of intra-State trade or commerce

(1) Subject to the provisions of section 5, intra-state supply of goods means any supply where the location of the supplier and the place of supply are in the same State.

(2) Subject to the provisions of section 6, intra-state supply of services means any supply where the location of the supplier and the place of supply are in the same State.
Hence, for determination of inter state supplies place of supply is the key factor. If it is in same state it would be intra state and if it is in different state if would be inter-state. If is only the second case where IGST would be payable.

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