2nd Edition: 31st March 2017
(Updated as on 1st January 2018)

Important Keyword: Section 7 IGST Act, Section 14 IGST Act, Section 5 IGST Act, Section 16 IGST Act, Section 20 of the IGST Act.

Index

1. Overview of Goods and Services Tax (GST)
2. Levy of and Exemption from Tax
3. Registration
4. Meaning and Scope of Supply
5. Time of Supply
6. Valuation in GST
7. GST Payment of Tax
8. Electronic Commerce
9. Job Work
10. Input Tax Credit
11. Concept of Input Service Distributor in GST
12. Returns Process and matching of Input Tax Credit
13. Assessment and Audit
14. Refunds
15. Demands and Recovery
16. Appeals, Review and Revision in GST
17. Advance Ruling
18. Settlement Commission [Omitted]
19. Inspection, Search, Seizure and Arrest
20. Offences, Penalties, Prosecution and Compounding
21. Overview of the IGST Act
22. Place of Supply of Goods and Service
23. GSTN and Frontend Business Process on GST Portal
24. Transitional Provisions

CENTRAL BOARD OF EXCISE & CUSTOMS
NEW DELHI

Overview of the IGST Act

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, two different union territory or in a state and union territory Further import of goods and services, supplies to SEZ units or developer, or any supply that is not an intra state supply. (Section 7 of the IGST Act).

Q 3. How will the Inter-State supplies of Goods and Services be taxed under GST?

Ans. Integrated Goods and Services Tax shall be levied and collected by Centre on inter- state supplies. Integrated Goods and Services Tax 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 Integrated Goods and Services Tax 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 Integrated Goods and Services Tax. The Importing dealer will claim credit of Integrated Goods and Services Tax while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of Integrated Goods and Services Tax used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing, 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 Integrated Goods and Services Tax law contains 25 sections divided into 9 Chapters. The law, 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.

The law also provides for determination of place of supply of service where both supplier and recipient are located in India (domestic supplies) or where supplier or recipient is located outside India (international supplies). This is discussed in details in the next Chapter.

It also provides for certain other specific provisions like payment of tax by online information and database access service provider located outside India to an unregistered person in India, upon taking registration in India, under the IGST Act, following a simplified provision (section 14 of the Integrated Goods and Services Tax Act),

Q 5.      What are the advantages of IGST Model?

Ans. The major advantages of IGST Model are:

1. Maintenance of uninterrupted ITC chain on inter- State transactions;
2. No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer;
3. No refund claim in exporting State, as ITC is used up while paying the tax;
4. Self-monitoring model;
5. Ensures tax neutrality while keeping the tax regime simple;
6. Simple accounting with no additional compliance burden on the taxpayer;
7. 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 (Integrated Goods and Services Tax). 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 Integrated Goods and Services Tax paid on import on goods and services. Exports of goods and services will be zero rated. The exporter has the option either to export under bond without payment of duty and claim refund of ITC or pay Integrated Goods and Services Tax at the time of export and claim refund of Integrated Goods and Services Tax. The Integrated Goods and Services Tax on imports is leviable under the provisions of the Customs Tariff Act and shall be levied at the time of imports along with the levy of the Customs Act (Section 5 of the Integrated Goods and Services Tax Act)

Q 7.  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 Integrated Goods and Services Tax will be done using the following hierarchy, –

• First available ITC of Integrated Goods and Services Tax shall be used for payment of Integrated Goods and Services Tax;
• Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment of Integrated Goods and Services Tax;
• 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 Integrated Goods and Services Tax liability, if any, shall be discharged using payment in cash. GST System will ensure maintenance of this hierarchy for payment of Integrated Goods and Services Tax using the credit.

Q 8. 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 Integrated Goods and Services Tax 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.

Q 9.  What treatment is given to supplies made to SEZ units or developer?

Ans. Supplies to SEZ units or developer shall be zero rated in the same manner as done for the physical exports. Supplier shall have option to make supplies to SEZ without payment of taxes and claim refunds of input taxes on such supplies (section 16 of the Integrated Goods and Services Tax Act).

Q 10. Are business processes and compliance requirement same in the IGST and CGST Acts?

Ans. The procedure and compliance requirement are same for processes likes registration, return filing and payment of tax. Further, the Integrated Goods and Services Tax act borrows the provisions from the CGST Act as relating to assessment, audit, valuation, time of supply, invoice, accounts, records, adjudication, appeal etc. (Section 20 of the Integrated Goods and Services Tax Act)

Read More: FREQUENTLY ASKED QUESTIONS (FAQs) ON GOODS AND SERVICES TAX (CGST/SGST) PART – 20

Download Pdf: FAQs on GST in English as on 01-01-2018