IGST stands for integrated Goods and Services Tax. It is the provision in the GST (Goods and Services Tax) which manages the movement of Goods and Services in the interstate. IGST is not an additional added tax and neither it substitutes the Central Sales Tax. In simple words, it is the sum of CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).
IGST = CGST + SGST
We all know that GST is a tax that is based on the destination and the with the help of IGST, one can easily ensure that the SGST is received by the state which uses the goods and services. By IGST, you can achieve –
- Avoid cascading effects by knowing the difference between SGST and CGST.
- The principle of destination-based consumption tax gets satisfied
Q. What are the Various Features of the IGST Model?
Given below are the features of the IGST Model
- Total of SGST and CGST.
- Charged on the intrastate and interstate transactions of the Goods and Services.
- The same IGST rate will be followed in India.
- Sharing between Centre and State.
- Interstate traders can pay the IGST only after adjusting the transactions of the input SGST, IGST, and CGST.
Q. What are the Advantages of the IGST Model?
Given below are the advantages of the IGST Model
- It an easy, transparent and can be managed by self-model.
- Manages tax neutrality in India.
- No extra burden on the taxpayers because the entire payment process will be faster.
- No need for physical document verification and claims because all the data is saved in the GSTN portal.
- The tax payment is done through an online platform and the process is easy and error-free.
- To check whether the ITC (Input Tax Credit) chain is continuous or not for Interstate transactions.
- Interstate sellers and buyers will not have to face the blockage of funds or an upfront payment of the tax.
- It is not mandatory to claim the refunds in the exporting State because ITC will be used during the tax payment.
- ‘Business to Business’ (B2B) and ‘Business to Consumer’ (B2C) transactions will be managed properly.
- The cost of GST compliance will be reduced because of the same tax rates and simplified procedures in India.
Illustration Under IGST
- Rajasthan seller sells to Maharashtra buyer for INR 10,00,000/-
- IGST due expecting an 8% rate is INR 80,000/-.
- INR 80,000/- can be adjusted by regulating
- Inter-State purchases (IGST) INR 40,000/-
- Local purchases (CGST) INR 20,000/-
- Local purchases (SGST) INR 20,000/-
- Since the seller has accepted the SGST of Rajasthan to the amount of INR 20,000/-, the Centre has to assign INR 20,000/- to Rajasthan Government.
- IGST of INR 80,000/- is availed as credit by the Maharashtra buyer.
