Integrated Goods and Service Tax – IGST

IGST Full Form

IGST stands for Integrated Goods and Services Tax.

IGST Meaning

IGST (Integrated Goods and Services Tax) is the GST levied by the Central Government on taxable inter-state supplies of goods or services. It also applies to taxable imports.

IGST is one of the three core taxes that form the GST. The other two are CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax). For ordinary domestic supplies, IGST generally applies when the supplier’s location and the place of supply are in different states or union territories.

Exports of goods or services are zero-rated under GST. Supplies to SEZ developers or units for authorised operations are also zero-rated, subject to GST conditions.

IGST Features

IGST has the following key features:

• Rate structure: For the same taxable supply, the IGST rate generally equals the corresponding CGST and SGST rates combined.
• Destination-based taxation: The state share of IGST is allocated to the destination state or union territory under GST settlement rules.
• Input tax credit: Eligible registered businesses can claim input tax credit of IGST paid on business purchases, subject to GST conditions.

Explaining IGST

To calculate IGST on a taxable value that excludes GST, use this formula:

IGST amount = Taxable value × Applicable IGST rate ÷ 100

Let us understand this with an IGST example:

• A business owner A in Maharashtra sells goods to a buyer B in Madhya Pradesh.
• The taxable value of the goods, before GST, is ₹50,000.
• Assume the applicable GST rate for these goods is 18%.
• Business owner A charges ₹9,000 as IGST: ₹50,000 × 18 ÷ 100.
• Buyer B pays a total invoice amount of ₹59,000: ₹50,000 + ₹9,000.
• Business owner A collects the IGST from buyer B and accounts for it in the GST return.

What is the IGST rate?

There is no single IGST percentage for every supply. The applicable rate depends on the goods or services and the relevant GST rate notification.

For a supply attracting 18% GST, an ordinary inter-state transaction generally attracts 18% IGST. The corresponding intra-state transaction generally attracts 9% CGST and 9% SGST. IGST is charged instead of charging CGST and SGST separately on the inter-state supply.

Important Points to Remember About IGST

IGST is payable on taxable inter-state supplies of goods or services, subject to the applicable GST provisions. Keep these points in mind:

• Collection and revenue sharing: The Central Government levies and collects IGST. The revenue is apportioned between the Centre and the destination state or union territory under GST settlement rules.
• Tax charged on the supply: For an ordinary taxable inter-state supply, IGST is charged instead of CGST and SGST. CGST and SGST generally apply to the corresponding intra-state supply.

IGST Refunds

Refund eligibility depends on why the tax was paid and the applicable GST conditions.

• CGST and SGST paid incorrectly: If a supply was treated as intra-state but is later identified as inter-state, pay the applicable IGST and claim a refund of the CGST and SGST wrongly paid.
• IGST paid incorrectly: If a supply was treated as inter-state but is later identified as intra-state, pay the correct CGST and SGST and claim a refund of the IGST wrongly paid.
• Eligible exports: Exports under a bond or Letter of Undertaking without payment of IGST may qualify for a refund of eligible unutilised input tax credit, subject to the prescribed conditions.