Q 17: How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?
Ans: The Empowered Committee has accepted the recommendation for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The major advantages of IGST Model are:
a. Maintenance of uninterrupted ITC chain on inter-State transactions.
b. No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
c. No refund claim in exporting State, as ITC is used up while paying the tax.
d. Self monitoring model.
e. Level of computerisation is limited to inter-State dealers and Central and State Governments should be able to computerise their processes expeditiously.
f. As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially.
g. Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account.
