Tax Incidence In IGST

CHAPTER-I

Introduction

IGST (Integrated Goods and Service tax) is a part of Goods and Service Tax (GST).

Integrated GST is one of the three categories under Goods and Service Tax (CGST, IGST and SGST) with a concept of one tax one nation. IGST is governed by Integrated Goods and Service Tax Act 2016.

As per GST Law:

Under the GST regime, an Integrated Goods and Service Tax (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269A of the Constitution of India, the GST on supplies in the course of inter State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Objectives of the Study

1. To understand the concept of Goods and Service Tax and gain idea regarding its proposed implementation in India.

2. To study the past literature related to GST and identify the research gaps in this field for enabling further research.

3. To provide conclusive remarks on the state of affairs with regard to GST in India.

Research Methodology

The present study is based on the past academic literature. The source of data mostly containing journals, research publications like conference proceedings, published and unpublished thesis and internet has been used to achieve the objectives stated above.

CHAPTER-II

IGST Model

GST is a mechanism to monitor the inter-State trade of goods and services and ensure that the SGST accrues to the consumer State.  It maintains the integrity of ITC chain in inter-State supplies. The IGST rate is equal to CGST rate plus SGST rate. IGST is levied by the Central Government on all inter-State transactions of taxable goods or services.

The IGST payment can be done by utilising the ITC. The amount of ITC on account of IGST is allowed to be utilised towards the payment of IGST, CGST and SGST, in that order.

CHAPTER-III

Nature Of Supply

 

It is very important to determine the nature of supply – whether it is inter-State or intra-State, as the kind of tax to be paid (IGST or CGST+SGST) depends on that.

(i) Inter-State Supply: Subject to the place of supply provisions, where the location of the supplier and the place of supply are in:

(a) Two different States;

(b) Two different Union territories; or

(c) A State and a Union Territory.

Such supplies shall be treated as the supply of goods or services in the course of inter-State trade or commerce.

Any supply of goods or services in the taxable territory, not being  an intra-State supply, shall be deemed to be a supply of goods or services in the course of inter-State trade or commerce. Supplies to or by SEZs are defined as inter-State supply. Further, the supply of goods imported into the territory of India till they cross the customs frontiers of India or the supply of services imported into the territory of India shall be treated as supplies in the course of inter-State trade or commerce. Also, the supplies to international tourists are to be treated as inter-State supplies.

(ii) Intra-State supply:

It has been defined as any supply where the location of the supplier and the place of supply are in the same State or Union Territory.

Intra-State supply

• Supply of goods within the State or Union Territory.

• Supply of services within the State or Union Territory

 

Inter-State supply

• Supply of goods from one State or Union Territory to another State or Union Territory

• Supply of services from one State or Union Territory to another State or Union Territory

• Import of goods till they the cross customs frontier

• Import of services

• Export of goods or services

• Supply of goods/services to/by SEZ

• Supplies to international tourists

• Any other supply in the taxable territory which is not intra-State supply

Therefore, the nature of the supply depends on the location of the supplier and the place of supply. Both these terms have been defined in the IGST Act.

Location of supplier is the registered place of business or the fixed establishment of the supplier from where the supply is made. Sometimes, a service provider has to go to a client location for providing service. However, such place would not be considered as the location of the supplier. It has to be either a regular place of business or a fixed establishment, which is having sufficient degree of permanence and suitable structure in terms of human and technical resources.

CHAPTER-IV

Place of Supply

 

Places of supply provisions have been framed for goods and services, keeping in mind the destination/consumption principle. In other words, the place of supply is based on the place of consumption of goods or services. As goods are tangible, the determination of their place of supply, based on the consumption principle, is not difficult. Generally, the place of delivery of goods becomes the place of supply. However, the services being intangible in nature, it is not easy to determine the exact place where services are acquired, enjoyed and consumed. In respect of certain categories of services, the place of supply is determined with reference to a proxy.

A distinction has been made between Business to Business  and Business to Consumer transactions, as B2B transactions are wash transactions since the ITC is availed by the registered person (recipient) and no real revenue accrues to the Government.

Separate provisions for the supply of goods and services have been made for the determination of their place of supply. Separate provisions for the determination of the place of supply in respect of domestic supplies and cross border supplies have been framed.

Place of supply of goods other than import and export [Section10]

S.no	Number of supply	Place of supply
1	Where the supply involves the movement of goods, whether by the supplier or the recipient or by any other person	Location of the goods at the time at which, the movement of goods terminates for delivery to the recipient
2	Where the goods are delivered to the recipient, or any person on the direction of the third person by way of transfer of title or otherwise, it shall be deemed that the third person has received the goods	The principal place of business of such person
3	Where there is no movement of goods either by supplier or recipient	Location of such goods at the time of delivery to the recipient
4	Where goods are assembled or installed at site	The place where the goods are assembled or installed
5	Were the goods are supplied on-board a conveyance like a vessel, aircraft, train or motor vehicle	The place where such goods are taken on- board the conveyance
6	where the place of supply of goods cannot be determined in terms of sub-sections (2), (3), (4) and (5)	t shall be determined in such manner as may be prescribed

Place of supply of goods in case of Import & Export [Section-11]

Sno.	Nature of Supply of Goods	Place of supply
1.	Importer	Location of importer
2.	Exporter	Location outside India

Place of supply of services in case of Domestic Supplies [Section12]

 

(Where the location of supplier of services and the location of the recipient of services is in India)

(i) In respect of the following 12 categories of services, the place of supply is determined with reference to a proxy. Rest of the services are governed by a default provision.

Sno.	Nature of service	Place of supply
1	Immovable property related to services, including hotel accommodation	Location at which the immovable property or boat or vessel is located or intended to be located If located outside India: Location of the recipient
2	Restaurant and catering services, personal grooming, fitness, beauty treatment and health service	Location where the services are actually performed
3	Training and performance appraisal	B2B: Location of such Registered Person B2C: Location where the services are actually performed
4	Admission to an event or amusement park	Place where the event is actually held or where the park or the other place is located
5	Organisation of an event	B2B: Location of such Registered person B2C: Location where the event is actually held If the event is held outside India: Location of the recipient
6	Transportation of goods, including mails	B2B: Location of such Registered Person B2C: Location at which such goods are handed over for their transportation
7	Passenger  transportation	B2B: Location of such Registered Person B2C: Place where the passenger embarks on the conveyance for a continuous journey
8	Services on board a conveyance	Location of the first scheduled point of departure of that conveyance for the journey
9	Banking and other financial services	Location of the recipient of services on the records of the supplier Location of the supplier of services if the location of the recipient of services is not available
10	Insurance services	B2B: Location of such Registered Person B2C: Location of the recipient of services on the records of the supplier
11`	Advertisement services to the government	The place of supply shall be taken as located in each of such States Proportionate value in case of multiple States
12	Telecommunication services	Services involving fixed line, circuits, dish etc., and place of supply is the location of such fixed equipment. In case of mobile/ Internet post-paid services, it is the location of billing address of the recipient. In case of sale of pre-paid voucher, the place of supply is the place of sale of such vouchers. In other cases, it is the address of the recipient in records

(ii) For the rest of the services other than those specified above, a default provision has been prescribed as under:

Default Rule for the services other than the 12 specified services

Sno	Description of supply	Place of supply
1	B2B	Location of such Registered Person
2	B2C	(i) Location of the recipient where the address on record exists, and (ii) Location of the supplier of services in other cases

 

Place of supply of services in case of cross-border supplies: (Section 13)

(Where the location of the supplier of services or the location of the recipient of services is outside India)

(i) In respect of the following categories of services, the place of supply is determined with reference to a proxy. Rest of the services are governed by a default provision.

Sno.	Nature of service	Place of supply
1	Services supplied for goods that are required to be made physically available from a remote location by way of electronic means (Not applicable in case of goods that are temporarily imported into India for repairs and exported)	The location where the services are actually performed, The location where the goods are situated
2	Services supplied to an individual and requiring the physical presence of the receiver	The location where the services are actually performed
3	movable property-related services, including hotel accommodation	Location at which the immovable property is located
4	Admission to or organisation of an event	The place where the event is actually held
5	If the said three services are supplied at more than one locations. i.e., (i) Goods & individual related (ii) Immovable property-related (iii) Event related	Its place of supply shall be the location in the taxable territory where the greatest proportion of the service is provided
5.1	At more than one location, including a location in the taxable territory	its place of supply shall be the location in the taxable territory where the greatest proportion of the service is provided
5.2	In more than one State	its place of supply shall be each such State in proportion to the value of services provided in each State
6	banking, financial institutions, NBFC Intermediary services, hiring of vehicles’ services etc.	Location of supplier of services
7	Transportation of goods	The place of destination of the goods
8	Passenger transportation	Place where the passenger embarks on the conveyance for a continuous journey
9	Services on-board a conveyance	The first scheduled point of departure of that conveyance for the journey
10	online information and database access or retrieval services	The location of recipient of service

(ii) For the rest of the services other than those specified above, a default provision has been prescribed as under:

Default Rule for the cross border supply of services other than nine specified services

Sno.	Description of supply	Place of supply
1	Any	Location of the recipient of service If not available in the ordinary course of business: The location of the supplier of service

 

Supplies in territorial waters

Where the location of the supplier is in the territorial waters, the location of such supplier, or where the place of supply is in the territorial waters, the place of supply is deemed to be in the coastal State or Union Territory where the nearest point of the appropriate baseline is located.

 Export/Import of services

A supply would be treated as import or export, if certain conditions are satisfied. These conditions are as under:

Export of services

Import of services

Means the supply of any service, where (a) the supplier of service is located in India, (b) the recipient of service is located outside India, (c) the place of supply of service is outside India, (d) the payment for such service has been received by the supplier of service in convertible foreign exchange, and (e) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation 1 of section 8

Means the supply of any service, where (a) the supplier of service is located outside India, (b) the recipient of service is located in India, and (c) the place of supply of service is in India

 

CHAPTER-V

Refund of integrated tax paid on supply of goods to tourist leaving India

Section 15 of the IGST Act provides provision for refund of IGST paid to an international tourist leaving India on goods being taken outside India, subject to such conditions and safeguards as may be prescribed. An international tourist has been defined as a non-resident of India who enters India for a stay of less than 6 months. IGST would be charged on such supplies as the same in the course of export.

CHAPTER-VI

CONCLUSION

IGST monitors the inter- state trade of goods and services and ensure that the SGST component accrues to the consumer state and ensures the tax neutrality while keeping the tax regime simple. It also facilitate in ensuring high level of compliance and thus higher collection efficiency. It can also handle ‘Business to Business’ as well as ‘Business to Consumer’ transactions.

The incidence of tax follows the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available as ITC of the IGST paid on import on goods and services.

Written by:

Shefali Gupta is a final year law student at Amity Law School, having interest in corporate laws.