Term Inter-State Goods and Service Tax (IGST) under GST
In this article, the information about Inter-State Goods and Service Tax (IGST) is explained here.
Inter Government
Inter-State Goods and Service Tax (IGST)
IGST would be levied on all supplies of goods and /or services in the course of inter-state trade or commerce. IGST would be applicable to import of goods or services from outside country as well, which is indicated in the Constitutional Amendment Act, 2016.
The balance of credit under VATs as well as CENVAT Credit can be carried forward from the earlier regime. Further the duty and tax paid on closing stock would be available as credit where duty paying documents available, for hitherto exempted products / services which may not have been claimed as set-off. Lower deemed credit is available for those who do not have duty paying documents.
Central government would levy IGST (which would be CGST + SGST) on all inter-state transactions of taxable goods and services with appropriate provisions for consignment or stock transfer of goods and services. The inter-state seller will pay IGST on value addition after adjusting available credit of IGST, CGST and SGST on his purchases. The exporting state will transfer to the centre the credit of IGST while discharging his output tax liability in his own state. The centre will transfer to the importing state the credit of IGST used in payment of SGST.
The empowered committee has accepted the recommendation for adoption of IGST model for taxation of inter-state transaction of goods and services. The scope of IGST model is that centre would levy IGST which would be CGST plus SGST on all inter-state transactions of taxable goods and services. The inter-state on his purchases. The exporting state will transfer to the centre the credit of SGST used in the payments of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability in his own state. The centre will transfer to the importing state the credit of IGST used in the payment of SGST. The relevant information is also submitted to the central agency which will act as a clearing house mechanism, verify the claims and inform the respective government to the transfer the funds.
The inter-state adjustment will be made by central clearing agency and the assesses will not be concerned with such adjustment at all. Under IGST, a dealer can establish hub and spoke approach for distribution of his final products. He can maintain depots at few strategic locations in country and from those locations; he can distribute goods to nearby states. This will be very cost effective distribution network for assesses.
The major advantages of IGST model are:-
- Maintenance of uninterrupted ITC chain on inter-state transactions.
- No upfront payment of tax or substantial blockage of funds for the interstate seller or buyer.
- No refund claim in exporting state, as ITC is used up while paying the tax.
- Self-monitoring model.
- Level of computerization is limited to inter-state dealers and central and state government should be able to computerize their process expeditiously.
- As all inter-state dealers will be e-registered and correspondence with them will be by e-mail the compliance level will improve substantially.
- Model can take business to business as well as business to consumer transactions into account.
The information on Inter-State Goods and Service Tax (IGST)is detailed above. Comment below your thoughts on Inter-State Goods and Service Tax (IGST)