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What is Integrated GST?

Integrated GST or Integrated Goods and Services Tax is one of the four types of GSTs levied by the Central Government on interstate supply of goods and services. The revenue collected under IGST is apportioned equally between the Central and the State Governments (of the state where the goods/services are consumed).

Features of IGST

Some of the key features of IGST (Integrated Goods and Services Tax) are:

 

  • IGST is applicable when goods/service is transferred from one state to another.

  • The tax is collected by the Central Government from the party sending the goods/service.

  • The revenue collected as IGST is distributed equally between the Central Government and the government of the state to which the goods/service is supplied (the state of consumption of the goods/service).

  • The input tax credit from all four categories of GSTs can be claimed while paying IGST.

Different Types of GSTs in India

The GST Act, 2017 prescribes four types of GSTs, namely CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), UTGST (Union Territory Goods and Services Tax) and IGST (Integrated Goods and Services Tax). The former three are applicable on the transfer of goods/services within a state or union territory, while IGST is applicable when a goods/service is transferred from a place in one state/UT to another state/UT. The following table clearly illustrates the key differences between the four types of GSTs:

 

CGST

SGST

IGST

UTGST

Applicability

Intrastate transfer of goods/services.

Intrastate transfer of goods/services.

Interstate transfer of goods/services.

Intra-UT transfer of goods/services.

Collecting Authority

Central Government

State Government

Central Government

UT Government

Benefitting Authority

Central Government

State Government

Central Government and the State Government of the state receiving the goods/services.

UT Government

Input Tax Claim Permissible

CGST and IGST

SGST and IGST

IGST, CGST and SGST

UTGST and IGST

What Makes IGST Different from CST

Under the old taxation regime, before the GST Act came into effect in 2017, Central Sales Tax (CST) was levied on interstate supply of goods and services as per the CST Act, 1956. Unlike GST, the CST revenue was collected by the State Government of the state of origin of the goods/service. The following table highlights the key differences between IGST and the erstwhile CST:

 

IGST (Integrated Goods and Services Tax)

CST (Central Sales Tax)

Applicability

Interstate supply of goods/services.

Interstate supply of goods/services.

Collecting Authority

Central Government

State Government of the state of origin of the goods/service.

Benefitting Authority

Revenue is equally divided between the Central and the State Government of the state consuming the goods/service.

Revenue is retained by the State Government that collected the tax.

Input Tax Claim Permissible

Input tax can be claimed against IGST, CGST or SGST.

Input tax claim not allowed.

IGST on Interstate Supply of Goods/Services

What makes the IGST different from other types of GSTs is that it applies to any movement of goods or services between different states/union territories. Another point to be noted is that IGST is also applicable on transactions associated with SEZs (Special Economic Zones)- import or export of goods/services to/from an SEZ is also considered an interstate transfer.

 

While IGST is collected by the Union Government, the revenue is shared equally between the Union and the State Government of the state where the goods/service is consumed as GST is a consumption-based tax.

 

Let us now understand how IGST collection works with the help of an example. Suppose Ashok is a trader in Delhi who transfers a product worth ₹1,000 to another trader Rashmi in Mumbai. Assuming that the product falls in the 18% GST slab, an IGST of ₹180 will be collected by Ashok from Rashmi (the product will cost ₹1180 to Rashmi) which he will pay to the Central Government. This amount will then be equally divided between the Central Government and the government of Maharashtra, both getting ₹90 each.

 

Running a business in multiple states is already a costly affair, and if your business falls in the 18% tax bracket, the IGST applicable would further reduce your working capital. A business loan can help you meet your financial needs and responsibilities. If your business is GST-compliant, getting a business loan is much easier. On Finserv MARKETS, you can get business loans approved within 2 mins with minimal documentation requirements.

Refund of IGST

IGST is applicable on all interstate transfers of goods and services. However, in certain cases, an individual or a business might be eligible to claim a refund of the GST they paid to the government. One can claim a GST refund in the following two cases:

 

  • Foreign Tourists: A foreign tourist who stayed in India for a period not exceeding six months can claim a refund of the IGST paid by them on the goods/services purchased from Indian merchants during their stay in the country.

  • Offsetting an Already Paid Tax: If an individual/business has already paid the applicable IGST under another tax header (either partly or fully), they can claim the refund of the already paid amount. For example, a manufacturer who has already paid IGST on the procurement of raw material can claim a refund of the same amount after paying the GST applicable on the sale of the manufactured goods.

Frequently Asked Questions

  • ✔️What is the meaning of IGST?

    IGST or Integrated Goods and Services Tax is the tax applicable on the interstate supply of goods/services. IGST is collected by the Central Government and the revenue is shared equally between the Central and State Governments.

  • ✔️Are GST & IGST the same?

    IGST is one of the four types of GSTs prescribed under the GST Act, 2017, the other ones being CGST, SGST and UTGST (more details above in the article).

  • ✔️Who are taxed under IGST?

    Any business that is registered under GST and is involved in the interstate transfer of goods/services is taxed under IGST.

  • ✔️How do I track IGST refund status?

    You can easily track the IGST refund status on the GST portal. All you need to do is:

    • Visit the official GST portal and log in with your credentials.

    • Navigate to “Services” > “Refunds” > “Track Application Status” > “Enter ARN” to track your refund application.