India chose to follow the dual GST model signifying Centre and States as partners in tax administration. This led to the current model of the three types of GST: Central GST (CGST) for use of Centre, State GST (SGST) for use of States and Integrated GST (IGST) for use of both. A clear understanding of the applicability of the three types is necessary for making payment of correct tax.

When a taxable good or service is supplied, the supplier pays the GST. CGST is the levy on the supply of goods and/or services within a particular State, by the Central Government. SGST is the levy on the supply of goods and/or services within a particular State, by the respective State Government. Union territories would levy Union territory GST (UTGST).

An intermediary tax IGST would be levied by the Centre on inter-State supply (including stock transfers) of goods or services. India is the first country to adopt the IGST. It is essentially an intermediary tax mainly on B2B transactions.

It is not envisaged as final tax as input tax credit of IGST would be available to the recipient in another State. IGST model ensures maintenance of uninterrupted Input Tax Credit chain on inter-State transactions.

If IGST is paid on the B2C transaction, the state where goods or services or both are consumed will get their share of SGST. IGST rate is expected to be double the CGST rate and will be uniform all over India.

Import of goods would be treated as inter-State supplies and subject to IGST in addition to the applicable customs duties. Import of services would be treated as inter-State supplies and would be subject to IGST.

Inter-state vs Intra-state supplies : Let us now understand when a supply would qualify as Inter-State or Intra-State Supplies.

Intra-State supply implies any supply of goods and/or services where the location of the supplier and place of supply are in the same State.

However as the SEZs are considered foreign territory, any supply concerning SEZs, even though within the same state would be considered Inter-State.

Utilisation of the GST credit: GST Acts provide guidelines on how the input tax credit could be utilised for making payment of taxes. The credit of CGST paid on inputs may be used for paying CGST and any leftover credit may be used for payment of IGST.

The credit of SGST paid on inputs may be used for paying SGST and any leftover credit may be used for payment of IGST. The credit of IGST paid on inputs may be used for paying IGST and any leftover credit may be used for payment of CGST and SGST in that order. A taxpayer is required to maintain separate details in books of account for utilisation or refund of credit.

Care needed : The GST would have to be paid online through the GSTN platform along with the filing of appropriate returns like GSTR 1,2, 3, etc.

While this means freedom from visiting tax offices, this also means taking utmost care in making right returns and payments on time. Any wrong or delayed payments may block the money paid and invite other actions.

The writer is from the Indian Trade Service. The views are personal. Adapted from his book, ‘The GST Nation: A Guide for Business Transformation’

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