IGST Method | GST Meaning

GST Meaning – 

The Goods and Services Tax (GST), is one of the the biggest reform in India’s indirect tax structure. The current structure of Indirect Taxes is very complex in India. There are varied types of taxes that are levied by the Central and State Governments on Goods and Services. In order to understand the GST meaning one has to understand the main expectation from this system which is is to abolish all indirect taxes and only GST would be levied.

Levy of GST

• Both Parliament, state Houses will have the power to make laws on the taxation of goods and services
• Parliaments Law will not override a state law on GST
• Exclusive power to Centre to levy, collect GST in the course of interstate trade or commerce, or imports. This will be known as Integrated GST (IGST)
• Central law will prescribe manner of sharing of IGST between Centre and states, based on GST Council’s view

Let us now try to understand the concept of Integrated Goods and Services Tax

IGST Method

In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The Integrated Goods and Services Tax mechanism has been designed to ensure seamless flow of input tax credit from one State to another.

The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). 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 IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

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