Everything You Should Know About IGST Integrated Goods And Services Tax

The integrated goods and services tax is known as IGST. The section of the GST (Goods and Services Tax) that controls interstate commerce in goods and services is this one. The Integrated Goods and Services Tax (IGST) does neither replace the Central Sales Tax nor is it an extra tax. To put it simply, it is the total of the state goods and services tax (SGST) and the central goods and services tax (CGST). 

Read ahead to have a brief understanding of Integrated Goods and Services Tax (IGST).

Understanding IGST

The Integrated Goods and Services Tax, or IGST for short, is a tax imposed on the interstate flow of products and services in India. On July 1, 2017, it was implemented in India as a component of the Goods and Services Tax (GST) reform. The central and state governments used to levy a number of indirect taxes, which were replaced by the comprehensive GST system.

One of the parts of the Goods and Services Tax (GST) is applied to the transfer of goods and services between Indian states and Union Territories. The tax collected in transactions involving the transfer of goods or services between states is known as the indirect general sales tax, or IGST. It covers all interstate transfers of products and services and is gathered by the federal government, which subsequently disburses it to the participating states or union territories.

By eliminating the cascading effect of taxes, increasing transparency in the tax system, and guaranteeing a fair and equitable distribution of tax revenues between the federal and state governments, the IGST was introduced with the intention of simplifying the tax code. By lowering trade obstacles between states and encouraging the unrestricted movement of goods and services throughout India, it also sought to establish a common market.

How do IGST, SGST, and CGST become put into practice?

The introduction of the Goods and Services Tax (GST) in India has completely changed the way taxes are managed and collected. Value Added Tax (VAT), Central Excise Duty, and Service Tax were among the indirect taxes that were superseded by the destination-based Goods and Services Tax (GST). Three categories of levies make up the Goods and Services Tax (GST): Central GST (CGST), State GST (SGST), and Integrated GST (IGST).

While state governments are in charge of collecting SGST on transactions made inside their borders, the central government is in charge of collecting CGST. Conversely, the Central Government is in charge of collecting IGST for transactions involving several states. The introduction of the Goods and Services Tax (GST) has streamlined the process of collecting taxes and established uniformity in tax rates throughout the nation.

IGST: What is it?

● The Central Government imposes a tax, which is governed by the IGST Act, on the sale of all interstate goods and services in India.

● Both imported and exported products and services are included in this.

● There is no tax applied to exported products or services. 

● The federal government and the appropriate state government split the taxes collected.

What characteristics does IGST have?

The following are a few IGST features:

• Levied on interstate supplies of goods and services; 
• Combines the CGST and SGST into a single tax; is collected centrally and disbursed to the states; 
• Aids in the removal of trade barriers between states and the creation of a common market; 
• Encourages transparency, equity, and efficiency in the tax system; 
• Seeks to simplify the tax code and stimulate economic growth.

Which state will be the recipient of the tax money?

The federal government and the state governments will split the tax income obtained from the IGST. The IGST collected at this step will be split between the central and state governments of Karnataka because the transaction between the dealer in Karnataka and the manufacturer in Tamil Nadu was an inter-state transaction. 

Similarly, the IGST collected at this step will be split by the central and state governments of Maharashtra, as the transaction between the retailer in Maharashtra and the dealer in Karnataka was likewise an inter-state transaction. 

Thus, in this instance, the following will be the distribution of the tax money obtained by IGST:

● The central government will receive Rs. 1,44,000 (80% of the IGST) for the transaction involving the Tamil Nadu producer and the Karnataka dealer, while the Karnataka state government will receive Rs. 36,000 (20% of the IGST).

● The central government will receive Rs. 2,16,000 (80% of the IGST) for the transaction between the Maharashtra state government and the Karnataka dealer, while the state government of Maharashtra will receive Rs. 54,000 (20% of the IGST).

All things considered, the IGST helps avoid double taxing on interstate transactions and guarantees that tax income is split evenly between the federal and state governments.

Things to Remember

The following are some key points to keep in mind about IGST:

1. The exporting state receives the cumulative benefit of IGST 
2. Compliance with deadlines and proper documentation is essential for IGST compliance 
3. In some circumstances, such as international exports, IGST refunds are available 
4. Eligible businesses may claim IGST as an input tax credit

Conclusion

Refunds for IGST paid on exports are available. The exporter needs to submit a shipping bill and a GST invoice to the appropriate authorities in order to be eligible for reimbursement. There are deadlines and requirements for the refund process, and any mistakes or inconsistencies may cause rejections or delays.