Q 1. What is IGST?
Ans. “Integrated Goods and Services Tax” (IGST) means tax levied
under the IGST Act on the supply of any goods and/ or services in the course of
inter-State trade or commerce.
Q 2. What are inter-state supplies?
Ans. A supply of goods and/or services in the course of inter-State
trade or commerce means any supply where the location of the supplier and the
place of supply are in different States. (Section 3(1) and 3(2) of the IGST
Act)
Q 3. How will the Inter-State supplies of Goods and Services
be taxed under GST?
Ans. IGST shall be levied and collected by Centre on inter-state
supplies. IGST would be broadly CGST plus SGST and shall be levied on all
inter-State taxable supplies 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 SGST used in payment 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 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 governments to transfer the funds.
Q 4. What are the salient features of the draft IGST Law?
Ans. The draft IGST law contains 33 sections divided into 11
Chapters. The draft, inter alia, sets out the rules for determination of the
place of supply of goods. Where the supply involves movement of goods, the
place of supply shall be the location of goods at the time at which the
movement of goods terminates for delivery to the recipient. Where the supply
does not involve movement of goods, the place of supply shall be the location
of such goods at the time of delivery to the recipient. In the case of goods
assembled or installed at site, the place of supply shall be the place of such
installation or assembly. Finally, where the goods are supplied on board a
conveyance, the place of supply shall be the location at which such goods are
taken on board.
Q 5. What are the advantages of IGST Model?
Ans. The major advantages of IGST Model are:
a. Maintenance of uninterrupted ITC chain on inter-State
transactions;
b. No upfront payment of tax or substantial blockage of
funds for the inter-State seller or buyer;
c. No refund claim in exporting State, as ITC is used up
while paying the tax;
d. Self-monitoring model;
e. Ensures tax neutrality while keeping the tax regime
simple;
f. Simple accounting with no additional compliance burden on
the taxpayer;
g. Would facilitate in ensuring high level of compliance and
thus higher collection efficiency.
Model can handle ‘Business to Business’ as well as ‘Business
to Consumer’ transactions.
Q 6. How will imports/exports be taxed under GST?
Ans. All imports/exports will be deemed as inter-state supplies
for the purposes of levy of GST (IGST). The incidence of tax will follow the
destination principle and the tax revenue in case of SGST will accrue to the
State where the imported goods and services are consumed. Full and complete
set-off will be available as ITC of the IGST paid on import on goods and
services. (Section 2(c) of the IGST Act).
Q 7. IGST Act is very small with very few definitions and
major part catering to settlement commissioner. Whether provisions in CGST or
SGST Act will apply to IGST Act?
Ans. Yes, Section 27 of the IGST Act provides that various provisions
as mentioned therein shall apply under IGST Act as they apply in relation to
levy under the CGST Act.
Q 8. How will the IGST be paid?
Ans. The IGST payment can be done utilizing ITC or by cash.
However, the use of ITC for payment of IGST will be done using the following
hierarchy:
1.
First available ITC of IGST shall be used for payment
of IGST;
2.
Once ITC of IGST is exhausted, the ITC of CGST
shall be used for payment of IGST;
3.
If both ITC of IGST and ITC of CGST are exhausted,
then only the dealer would be permitted to use ITC of SGST for payment of IGST.
Remaining IGST liability, if any, shall be discharged using payment
in cash. GST System will ensure maintenance of this hierarchy for payment of
IGST using the credit.
Q 9. How will the settlement between Centre, exporting state
and importing state be done?
Ans. There would be settlement of account between the centre
and the states on two counts, which are as follows-
• Centre and the exporting state: The exporting state shall
pay the amount equal to the ITC of SGST used by the supplier in the exporting
state to the Centre.
• Centre and the importing state: The centre shall pay the
amount equal to the ITC of IGST used by a dealer for payment of SGST on intra-
state supplies.
The settlement would be on cumulative basis for a state taking
into account the details furnished by all the dealer in the settlement period.
Similar settlement of amount would also be undertaken between CGST and IGST
account.