Integrated Goods and Services Tax (IGST) is a key component of India's Goods and Services Tax (GST) system, designed to streamline taxation on inter-state transactions of goods and services. Introduced on July 1, 2017, IGST aims to simplify the tax structure, eliminate the cascading effect of taxes, and promote seamless trade across state boundaries.
IGST is levied on the supply of goods and services that occur between different states or Union Territories in India. It ensures that when goods or services move from one state to another, the transaction is taxed uniformly, preventing tax evasion and promoting a common national market. The central government collects IGST, which is then shared between the origin and destination states, ensuring that the tax revenue benefits the state where the goods or services are consumed.
Consider a scenario where a manufacturer in Delhi sells goods worth ₹1,00,000 to a retailer in Mumbai. Since this is an inter-state transaction, IGST applies. If the IGST rate is 18%, the calculation would be:
The retailer in Mumbai would pay ₹1,18,000 (₹1,00,000 for the goods + ₹18,000 IGST). The ₹18,000 IGST is collected by the central government and later apportioned between Delhi and Maharashtra, the origin and destination states, respectively.
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Points to Remember About IGST:
Integrated Goods and Services Tax (IGST) plays a crucial role in India's GST framework by ensuring a uniform and efficient taxation system for inter-state transactions. It simplifies compliance, promotes transparency, and facilitates the seamless movement of goods and services across state boundaries, contributing to the growth of the national economy.
Integrated Goods and Services Tax (IGST) is a tax levied on the supply of goods and services in the Indian territory. It is one of the three taxes levied under India's Goods and Services Tax (GST) regime. The other two taxes are the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). IGST is levied and collected by the Central Government and then shared between the Centre and the States in the ratio of 50:50.
The main rationale behind the introduction of IGST is to remove the cascading effect of taxes on the supply of goods and services. Under India's current indirect tax regime, there are a number of taxes levied at different stages of the supply chain. This leads to the cascading of taxes, i.e., the imposition of tax on tax. The introduction of IGST will help mitigate the cascading effect of taxes and will thus reduce the cost of goods and services.
IGST is collected and administered by the Central Government. It is collected based on the invoices raised by the suppliers of goods and services. The tax is payable by the recipients of the goods and services.
IGST stands for Integrated Goods and Services Tax.
IGST is applicable to inter-state transactions of goods and services, as well as imports and exports.
The central government collects IGST on behalf of both the central and state governments.
IGST applies to inter-state transactions, while CGST and SGST apply to intra-state transactions.
Yes, businesses can claim input tax credit for IGST paid on inter-state purchases, offsetting their tax liability on sales.