Integrated Item and Service Tax (IGST) is not A Tax under GST: Item and Service Tax (GST) has actually changed nearly 17 indirect taxes in India. Among all, Central Import Tax Responsibility, Service-tax and State Worth Included Tax (BARREL) were readily available as Input Tax Credit (ITC) which assisted in decrease of cascading result of products/ services in worth chain.
Other than these 3, all other taxes of the previous Indirect Tax routine were developing cascading impact in the worth chain as those taxes were not offered as ITC to its buyer. Especially, there was Central Sales Tax (CST) imposed on inter-state motion of items was likewise not readily available as ITC to the buyer of the items. Due to this services utilized to turn to acquire products in your area (i.e. within state) rather of inter-state purchase.
Function of Integrated Item and Service Tax (IGST) under GST
After passing of the Constitution (One Hundred and First Modification) Act, 2016, the Parliament of India passed following legislations for intro of GST in India–
- a) Central Product and Provider Tax Act, 2017; [the CGST Act]
- b) Integrated Product and Solutions Tax Act, 2017; [the ITGST Act]
- c) Union Area Product and Solutions Tax Act, 2017; [the UTGST Act]
- d) Item and Solutions Tax (Payment to States) Act, 2017
Likewise, all States with Legal Council have actually passed their particular State Product and Service Tax Act [the SGST Act].
India, being the Union of States, has actually embraced concurrent double GST Design, under which, for Intra-State supply, CGST and SGST will be imposed and for Inter-state supply of products or services or both, IGST will be imposed. Under GST import of items would suffer IGST in addition to Customs Task.
Based on the plan of GST legislations (i.e. the CGST Act, the SGST Act and the IGST Act), ITC will be used versus Output Tax Liability in the following way–
Schedule of ITC Utilisation versus Output Tax Liability
- CGST ⇒ versus CGST and balance if any, versus IGST
- SGST ⇒ versus SGST and balance if any, versus IGST
- IGST ⇒ versus IGST, then CGST and balance if any, versus SGST.
The cross usage of CGST with SGST and vice versa will not be permitted under GST. Let us comprehend how ITC usage will work under GST with an example-
* Contributed by DS Mahajani, General Supervisor (Tax) and Business Secretary, Transpek-Silox Market Pvt. Ltd, and member ICSI-GST Core Advisory Group
ABC Ltd has following balance of ITC under CGST, SGST and IGST Account–
- CGST– Rs.800/-
- SGST– Rs.600/-
- IGST– Rs.2900/- (gathered from inbound Inter-state supply)
As versus this, ABC Ltd has Output Tax Liabilities is as under–
- CGST– Rs.1000/-
- SGST– Rs.800/-
- IGST– Rs.2200/-
Now according to the GST Legislations, ABC Ltd will release its Output Tax Liabilities versus ITC of CGST, SGST and IGST in the following way–
Thinking About above, it can be stated that IGST is not a tax however is a system through which ITC can be set-off versus Output Tax liabilities under CGST and SGST in a specified way.
As versus CST (which was cost in the previous tax routine), IGST is the genuine video game changer in GST routine, as it will enhance inter-state motion of products. Even more, IGST imposed on imports would be offered as ITC to the signed up individual so Import would be more expensive to an individual not signed up under GST. This will be fantastic relief to domestic Market.
For this reason, with reliable IGST credit system in location, GST would transform the nation into unified market which will have direct influence on ‘ Make in India’ effort and total boost in GDP development of the Nation
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