gst

Had it been intra-state transaction CGST and SGST would have been charged in case of interstate transaction IGST would be charged i.e the whole tax would be collected by central and will be distributed to the state where the supply took place in GST act the main focus is on consuming state, unlike the earlier regime where the Value added tax were kept by originating state.  

Meaning Of Integrated goods and services:

IGST is proposed to be levied on the interstate transactions of goods and services from one state to another state.

Example: X of Rajasthan sold computers to Y of Punjab for Rs. 90,000 and the GST rate is 18%

Entry will be in this way :

Computer A/c  Dr                90,000

Input IGST A/C  Dr.(18%) 16,200

To X a\c                              106,200

( entries in Y books of a/c)

Account entry in x books of accounts

Y a/c dr.                              106,200

To computer                         90,000

To output IGST (18%)       16,200

[1]Key feature Of integrated GST?

  • Reduce errors and increase efficiency
  • Efficient use of resources
  • Improved compliance and revenue collection
  • Maintenance of records
  • Input ax credit set off
  • Online system for tax compliance
  • Exports to b zero stated
  • Imports will be analyzed as inter-state supplies and would attract IGST.

What is Input Tax Credit:

An income tax credit means while paying tax, we can adjust input tax against output tax amount for example output tax is 600, and input tax is 400; therefore 600-400= 200 only need to pay.

Input Tax Credit in GST:

The input tax credit is available when we register under the GST act.

1. Should have a tax invoice of purchase or debit note.

2. Should receive the goods and services

  1. The supplier has to file GST returns as per the due dates.
  2. If output tax is greater than input tax then the remaining balance has to pay.
  3. If the output is less than the input tax then the input tax balance will carry forward.

Types of Taxes Under GST:

SGST     =     State GST

CGST    =     Centre GST

IGST     =    Integrated GST.

There are some important rules which I have to discuss below:

[2]Rule 88A Order Of Utilization of input tax credit:

Input tax credit on account of integrated tax

  • Shall first be utilized towards payment of integrated tax
  • And the amount remaining if any,
  • May be utilized towards the payment of central tax and state tax or Union territory tax,
  • As the case may be.
  • In any order

(IGST credit first for IGST and then for CGST or SGST in any order)

Types of Taxes:
  • Central Tax
  • State tax or Union territory tax
  • Shall be utilized towards payment of integrated tax, central tax, state tax, or union territory   tax as the case may be
  • Only after the input tax credit available on account of integrated tax has been utilized fully.

Inserted by central tax and service tax (second amendment) Rules, 2019, w.e.f. 1-4-2019.)

Section 49(5):

The amount of input tax credit available in the electronic credit ledger of the registered person on account of –

  1. The integrated tax shall first be utilized towards payment of integrated tax and the amount remaining if any may be utilized towards the payment of central tax and state tax as the case may be union territory in that order;
  2. The central tax shall first be utilized towards payment of central  tax and the amount remaining if any may be utilized towards the payment of integrated tax:
  3.  The central tax shall not be utilized towards payment of state tax or Union territory tax and
  4. The state tax or Union territory tax shall not be utilized towards payment of central tax;

Conclusion:

If you have the credit of IGST first shall be exhausted and that can be used for payment in the following manner;

  • Integrated tax goods and services
  • CGST or S/ UTGST ( we can use for a party for CGST or SGST as we want to “any order”
  • The credit of CGST for CGST and SGST can be used only when the credit of IGST is fully exhausted.

2) If we have the credit of CGST it should utilize for payment of CGST and IGST.

3) If we have the credit of CGST and SGST both and IGST liability is there.   Under Article 269A of the constitution, The GST on supplies in course of interstate trade or commerce shall be levied and collected by the government of India and such tax shall be appointed between the union and states in the manner as may be prescribed by Parliament by law on the recommendation of goods and service tax council.[3]

References:

[1] Basic feature of integrated goods and services tax in India, girish garg, vol.2, issue2.

[2] https://taxguru.in/goods-and-service-tax/new-rule-88a-order-utilization-input-tax-credit-examples.

[3]  Indian constitution,1950


Author:

harshil munjal Harshil Munjal | JECRC University (School of Law), Jaipur

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