What is Integrated Goods and Services Tax?

 

Integrated Tax (IGST) is one of the key components of India's Goods and Services Tax (GST) system. It is levied on the supply of goods and services across state borders within India. Here are the key points about Integrated Tax (IGST):

1. **Interstate Transactions**: IGST is applicable to transactions involving the supply of goods and services between different states or Union territories of India. It replaces the Central Sales Tax (CST) that was applicable to interstate sales under the previous tax regime.

2. **Destination-Based Taxation**: IGST follows the principle of destination-based taxation. This means that the tax revenue accrues to the state where the goods or services are consumed, rather than to the state where they are produced.

3. **Single Tax**: Unlike the previous tax system, where both Central and State taxes were levied separately on interstate transactions, IGST is a single tax levied by the central government on interstate supplies. It is designed to facilitate seamless trade and reduce tax complexities for businesses.

4. **Collected by the Central Government**: IGST is collected by the central government, and the revenue is shared between the central and state governments based on the destination principle. The state where the goods or services are consumed receives the share of revenue.

5. **Input Tax Credit (ITC)**: Businesses can claim Input Tax Credit (ITC) for IGST paid on inputs, input services, and capital goods used in the course of business, similar to the credits available for Central GST (CGST) and State GST (SGST) paid.

6. **Uniform Rate**: The rate of IGST is usually aligned with the rate of CGST and SGST applicable to intra-state transactions. This ensures uniformity in tax rates across the country.

7. **Import of Goods and Services**: IGST is also applicable to the import of goods and services into India. It is levied on the value of imported goods or services, along with customs duties.

Overall, IGST plays a crucial role in the GST system by harmonizing taxation on interstate transactions, promoting economic integration across states, and simplifying compliance for businesses engaged in interstate trade.