Glossary
What is IGST?
The single tax at the full rate on every sale that crosses a state border.
Updated
In short
IGST is the GST charged at the full rate on supplies between two states and on imports, collected by the central government. SimpleERP switches an invoice to IGST automatically when the place of supply is in another state.
IGST, Integrated Goods and Services Tax, is charged on supplies between two states and on imports, at the full GST rate. The central government collects it and then settles the destination state's share. An 18% supply from Tamil Nadu to Kerala carries IGST 18% instead of CGST 9% and SGST 9%, so the buyer pays the same total either way.
IGST: a worked example
Lakshmi Steel Furnitures in Coimbatore sells 10 steel racks at ₹4,990 each to a dealer in Kochi, Kerala. The place of supply is Kerala, so the sale is inter-state. Assuming the racks carry 18% GST, the taxable value of ₹49,900 attracts IGST of ₹8,982 and the invoice totals ₹58,882. Rates change, so confirm the rate for your goods with your CA or the GST portal before you rely on it.
| Same sale, two customers | Coimbatore buyer | Kochi buyer |
|---|---|---|
| Taxable value | ₹49,900 | ₹49,900 |
| CGST 9% | ₹4,491 | None |
| SGST 9% | ₹4,491 | None |
| IGST 18% | None | ₹8,982 |
| Invoice total | ₹58,882 | ₹58,882 |
When does IGST apply instead of CGST and SGST?
IGST applies when the supplier's registered location and the place of supply are in different states or union territories, on imports of goods and services, and on supplies to SEZ units. Inside one state, CGST and SGST apply. The deciding question is always the place of supply, not where the buyer's head office is or which state's bank pays you.
FAQ
Questions, answered
Why does IGST show the full rate and not half?
Because only one government collects it. On an inter-state sale the central government collects the whole tax as IGST and later passes the destination state's share to that state. The buyer pays the same total as on an intra-state sale at the same rate.
Can I use IGST credit to pay CGST and SGST?
IGST credit can pay CGST and SGST. Input IGST is used first against output IGST, and any balance can then pay CGST and SGST in any order. This is why a business that buys from other states but sells locally can still use all its credit.
My customer is in Tamil Nadu but wants goods delivered to a site in Kerala. Which tax applies?
Under the bill-to-ship-to rule, when goods are delivered to another person on the buyer's instruction, the place of supply is the buyer's principal place of business. A Tamil Nadu buyer billed by a Tamil Nadu supplier usually means CGST and SGST. Confirm unusual cases with your CA.
Is IGST charged on imports?
IGST is charged on imports. Imported goods attract IGST at customs along with customs duty, and imported services attract IGST that the Indian recipient usually pays under reverse charge. A registered importer can generally claim this IGST as input tax credit.
Related
Keep reading
CGST
The central government's half of GST on a sale within one state, charged alongside SGST.
Read morePlace of supply
Where GST treats a supply as happening, which decides CGST and SGST or IGST.
Read moreGST calculator
Add GST to a price and see the CGST, SGST or IGST split from the seller's and buyer's states.
Read more
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