IGST – Integrated Goods and Services Tax


Under the Goods and Services Tax (GST) system, the Integrated Goods and Services Tax (IGST) rate is determined by adding the Central Goods and Services Tax (CGST) rate and the State Goods and Services Tax (SGST) rate. The IGST is applicable to all inter-state transactions of taxable goods or services and is collected by the Central Government. The collection process involves transferring funds between the relevant accounts.

Benefits of IGST

The IGST (Integrated Goods and Services Tax) is primarily used for transactions that involve the movement of goods or services from one state to another. It is collected by the Central Government from the entity that sends the goods or provides the services.

When IGST is collected, the revenue is divided equally between the Central Government and the state government where the goods or services are consumed. This ensures that both levels of government receive a share of the tax revenue.

One of the benefits of IGST is that it allows for input tax credit from all four categories of GSTs to be claimed when paying the tax. This helps to simplify the tax process and ensure that businesses are not taxed multiple times for the same transaction.

IGST is a feature of the GST system in India that helps to streamline the taxation of inter-state transactions. By collecting the tax at the Central level and distributing the revenue to the relevant state, IGST ensures that the tax system is fair and efficient.

IGST on Interstate Supply of Goods/Services

IGST stands out from other forms of GST because it is imposed on the transfer of goods or services between different states or union territories, including transactions related to SEZs. The Union Government is responsible for collecting IGST, but the revenue is divided equally between the Union and State Government of the state where the goods or services are consumed, as GST is a tax based on consumption.

Let’s take an example to understand how the collection of IGST works. Suppose, a manufacturer in Gujarat sells goods worth ₹50,000 to a buyer in Tamil Nadu. Assuming the applicable GST rate is 12%, the IGST charged on the transaction would be ₹6,000. The manufacturer would collect this amount from the buyer and then pay it to the central government. The revenue would then be shared equally between the central government and the Tamil Nadu state government, with each getting ₹3,000.

Running a business can be expensive, especially if you operate in multiple states and have to comply with various tax laws. The IGST applicable on inter-state transactions can further reduce your working capital. However, if your business is GST-compliant, you can easily access business loans to meet your financial requirements. Platforms like Bajaj Markets offer quick and hassle-free business loans with minimal documentation requirements.

How are the GST rates fixed?

The process of fixing GST rates involves the GST Council, which was established when the Goods and Services Tax was introduced in 2017. The council is responsible for setting rates and addressing concerns from traders and customers. Meetings are held where decisions are made and any changes to GST rates are announced. The council collaborates with the government and relevant ministries to determine rates based on the product.

Refund of IGST

For international tourists visiting India for up to six months, the process for refunding IGST is similar to that of exports. The Indian tax law allows for a refund of IGST paid on goods taken out of the country by non-resident tourists. Taxpayers who have mistakenly paid SGST or CGST instead of IGST can also receive a refund, but must first re-deposit the payment in the correct tax head.