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Complete Details Of Integrated Goods and Services Tax

Complete Details Of Integrated Goods and Services Tax

Integrated Goods and Services Tax : Integrated GST (Integrated Goods and Services Tax). Everything you want to know about IGST. Check Complete details for IGST 2017. According to section 2(c), “Integrated Goods and Services Tax” (IGST) means tax levied under this Act on the supply of any goods and/or services in the course of inter-State trade or commerce.

Explanation 1.- A supply of goods and/or services in the course of import into the territory of India shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

Explanation 2. – An export of goods and/or services shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

Complete Details Of Integrated Goods and Services Tax

Integrated Goods and Services Tax :  IGST or integrated goods and services tax would mean the tax levied under IGST Act on the supply of any goods and / or services in the course of inter-state trade or commerce.

‘Goods’ and ‘services’ are defined in the Constitution of India itself vide 122nd Amendment. CGST Act in its section 2(50) also defines IGST as tax levied under the IGST Act.

IGST shall also apply to import of goods and services into India. The explanation stipulates that any supply of goods or services in the course of import of goods or services into Indian territory shall be deemed to be supply of goods / services in the course of inter-state trade or commerce and hence liable the IGST.

It has also been proposed that like import transactions, export of goods and services shall be deemed to be supply in course of inter-state trade or commence.

What is Integrated GST

The IGST Act comprises of the following:

  • • 11 Chapters
  • 33 Sections
  • 8 Definitions

This legislation is called the integrated Goods and Services Tax Act, 2016 (in short IGST), an Act to levy, collect and administer IGST in India.

This Act shall be applicable to whole of India, i.e., including the State of Jammu & Kashmir. Presently, Service Tax does not apply to State of Jammu & Kashmir but Central Excise Act, 1944 applies to that state. What is meant by ‘India’ is defined in section 2(35) of Goods and Services Tax Act, 2016.

The Act after being legislated shall come into force from a date which will be notified by the Central Government by way of a notification. It may also appoint different dates for enforcement of different provisions of the Act.

Interstate trade or commerce will, therefore include supply of goods / services in the course of –

  • Inter-state trade or commence
  • Import into Indian territory (deemed to be inter-state)
  • Export (deemed to be inter-state)

Thus, IGST shall apply to inter-state transactions and import as well as export transactions (deemed to be inter-state transactions) relating to supply of goods and / or services.

Complete Details Of Integrated Goods and Services Tax

Integrated Goods and Services Tax : A new model is developed  under proposed GST to monitor the interstate trade of Goods and Services and this is called IGST“Integrated Goods and Service Tax”. Let me clear first thing it will not replace the existing CST and there will be long awaited goodbye to Central Sales Tax in the GST regime.

Now it should also be noted that IGST will not be a Tax in addition to the SGST and CGST so one should not presume that besides SGST and CGST the IGST- The Integrated Goods and Service Tax is a third tax in the coming GST regime. It is only an IT based centrally managed automated mechanism to monitor the “Interstate sale and Supply of Goods and services” and further it ensures that the ultimate SGST is gone to the consumer state since the GST is a destination based tax. It is called “integrated Goods and Service Tax”.

IGST MECHANISM STEP BY STEP

S.No

Description

1Dealer of the selling state will collect IGST from the purchaser on Interstate Transaction and the rate of IGST will be the combined rate of SGST and CGST, Say if the rate of SGST is 8% and CGST is 10% then the rate of IGST will be 18%.
2While depositing the IGST the seller will take credit of SGST and CGST paid by him on purchase of such Goods or services within the state.
3 The selling state will transfer the amount of input credit of SGST taken by the selling dealer against the liability of IGST to the centre. This will ensure that selling state will not get any revenue out of this transaction.
4The interstate buyer shall take credit of IGST against his liability of <strong>IGST / CGST/ SGST in this order.
5The centre will transfer the amount of input credit of IGST used by selling dealer of consumer state while paying his liability of SGST.

This whole mechanism will be known as a system of monitoring the interstate trade of Goods and services and will be called IGST. It is integrated Goods and service tax .

Since the concept of Taxation is changed from the sales to Supply of Goods and Services under the GST hence “Branch and stock transfer” will also be governed with the model.

Complete Details Of Integrated Goods and Services Tax

Integrated Goods and Services Tax :  The IGST will not increase the taxation cost since it is only a Mechanism to monitor the Interstate movement of Goods but certainly it will increase the compliance cost of the dealers. Further the tax is required to be deposited at the time of transfer of Goods in the form of stock and Branch transfer it will certainly increased the capital cost of the amount of tax.

BASIC ILLUSTRATION OF IGST

Though practically how IGST will actually work can only be understood properly when it is implemented but whatever information is available at present from the basics which has been mentioned in the Draft law we can understand the IGST with the help of this very simple example:

TRANSACTIONS OF SALES

X of Mumbai sold Goods worth Rs. 10.00 Lakhs toY of Mumbai and Y of Mumbai sold the same goods to Z of Rajasthan at Rs. 10.50 Lakhs.

Now at second stage Z of Rajasthan sold the same goods to a consumer in Rajasthan at Rs.11.00 Lakhs. Suppose the rate of SGST is 8% and rate of CGST is 10%.

Now this is the transaction of sale of Goods from one state to other state and now we are trying to analyze how IGSTwill work here.

Note:

Please note that in the example given above we have not followed the exact situation which has been mentioned in the draft of“Integrated Goods and Service Act”with respect of transfer of fund to and from the IGST to CGST and SGST because it seems to be very complicated and need some simplification of narration but what is given in this study will give you the insight of proposed working of the IGST.

RATE OF TAXES PRESUMED

S.NO

Description

Rate of Tax

1SGST8%
2CGST10%
3IGST( SGST+CGST)18%

TAX LIABILITY OF VARIOUS DEALERS

S.NO

DESCRIPTION 

SGST

CGST

IGST

REMARK

1X of Mumbai sold Goods worth Rs. 10.00 Lakhs to Yof Mumbai.80000.00100000.00NAIt is an Intra-state Sales hence SGST and CGST are Payable.
  Less: Input creditNILNILNA
 Tax deposited by X80000.00100000.00NA
2Y of Mumbai sold the same goods to Z of Rajasthan at <strong>Rs. 10.50 LakhsNANA189000.00It is Inter-state sale hence IGST is Payable.
  Less: Input creditNANA180000.00

( SGST+CGST= 80000+100000=180000)

In IGST the input credit of SGST and CGST paid on the goods which is sold in interstate sale is available.
 Tax deposited by YNANA9000.00
3Z of Rajasthan sold the same goods to a consumer in Rajasthan at Rs.11.00 Lakhs.88000.00110000.00NAIt is intra-state sale in the state of Rajasthan hence SGST and CGST is applicable.
Less: Input credit79000.00110000.00NAThe total Input credit of IGST is Rs.189000.00 and it can be set of against IGST, CGST and SGST in that order of priority.
Tax deposited by Z9000.00NILNA

 TRANSFER OF REVENUE FROM STATE TO CENTRE AND VICE VERSA

S.NO.

DESCRIPTION

AMOUNT

1The selling state will transfer the amount of SGST to the centre which has been taken as input credit while discharging the liability of IGST80000.00
2The centre will transfer the amount of IGST to the Consumer state which has been taken as input credit while discharging the liability of SGST.79000

EFFECT OF IGST ON REVENUE OF VERIOUS CONSTITUENTS

S.NO

DESCRIPTION OF CONSTITUENTS OF IGST

1THE SELLING STATE
2THE PURCHASING STATE
3THE CENTRE

THE SELLING STATE

S.NO

DESCRIPTION

SGST

REMARK

1The amount of SGST deposited by the First seller80000.00CGST and IGST are not part of state revenue hence not considered here
2Less:- The selling state will transfer the amount of SGST to the centre which has been taken as input credit while discharging the liability of IGST.80000.00NA
3Revenue of the Selling StateNILNA

Note: The GST is destination based tax hence the selling state will get NIL tax on inter-state transaction where goods are consumed in other state. The above calculation is supporting the same concept.

THE CONSUMER STATE

S.NO.

DESCRIPTION

SGST

REMARK

1The amount of SGST deposited by the seller in the Consumer state.9000.00CGST and IGST are not part of state revenue hence not considered here.
2Add-The centre will transfer the amount of IGST to the Consumer state which has been taken as input credit while discharging the liability of SGST.79000.00NA
3Revenue of the Consumer State88000.00NA

Note:The sale price at consumer state is Rs.11.00 Lakhs @ 8% hence the revenue calculated at Rs.88000.00 is cross tallied and supported the same concept.

THE CENTRE

S.NO.

DESCRIPTION

CGST

IGST

TOTAL

1The amount of CGST deposited by the First seller in the Selling state.100000.00NIL100000.00
2The amount of IGST deposited by the Second seller in the Selling state.NIL9000.009000.00
TOTAL100000.009000.00109000.00
3The selling state will transfer the amount of SGST to the centre which has been taken as input credit while discharging the liability of IGSTNANA80000.00
TotalNANA189000.00
Less – The centre will transfer the amount of IGST to the Consumer state which has been taken as input credit while discharging the liability of SGSTNANA79000.00
Result-Revenue of the CentreNANA110000.00

Note: The sale price at consumer state is Rs.11.00 Lakhs @10% hence the revenue calculated at Rs.110000.00 is cross tallied and supported this concept.

This will complete the full circle of IGST.

Complete Details Of Integrated Goods and Services Tax

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