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What is IGST?
On inter-state supply of goods and services, Integrated GST (IGST) is collected by Centre. IGST is also applicable on imports.
GST is a consumption based tax i.e. the tax is received by the state in which the goods or services are consumed and not by the state in which such goods are manufactured. IGST is designed to ensure seamless flow of input tax credit from one state to another. Every state has to deal only with the Central government to settle the tax amounts and not with every other state, thus making the process easier.
Rajesh in Maharashtra had sold goods to Anand in Gujarat worth Rs. 1,00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%. In such case the dealer has to charge Rs. 18,000 as IGST. This IGST will go to the Centre.
Levy and collection
- Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both; except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:
Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.
- The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
- The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
- The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
- The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
IGST to be levied Only After Goods Cleared by Customs
The integrated goods and services tax (IGST) would not be levied on sale of goods on high seas, but would have to be paid when these goods finally clear customs.The Central Board of Excise and Customs has clarified the issue bringing much-sought relief to companies in the oil and gas, power and telecom sectors.
High sea sales
It is a common trade practice where in original importer sells goods to a third person before they are customs cleared. Final customs cleared is filed by the final owner.
Circular issued by The Central Board of Excise and Customs
- The CBEC has issued a circular after receiving references on the issues as all interstate transactions are subject to IGST and High sea sales are akin(similar) to such transactions. IGST would be required to be levied only once at the time of importation of goods, which is when goods are cleared by customs.
- It has further been clarified that value addition accruing in each high sea sale transaction shall form part of the value on which IGST would be levied at the time of clearance. This means that IGST would be payable on the value for the last buyer in the chain.
- The circular provides logical and right clarity that high sea sale should be taxed only once in the hands of the ultimate importer.
Documents to be furnished by Importer
- Original Invoice,
- High-Sea-Sale Contract,
- Details of services charges/ commission paid, etc.
These documents are required to establish a link between first contracted price of goods and the last transaction.
Issues yet to be clarified
- One issue that remains to be clarified is whether in the hands of the high sea seller the transaction would be treated as non-taxable and would trigger reversal of common input GST credits or not. It is an important clarification which puts the debate on taxability of high sea sales to rest.
- Other issue which need to be clarified is as to whether it would be treated as exempt supply in the hands of the high seas seller triggering reversal of input credit in any manner.