Q. What do you mean by IGST model? Describe various features of IGST model. Explain in detail the advantages of IGST model.
Ans. Meaning of IGST Model
IGST is the provision under GST to monitor the Inter-state movement of Goods and Services. IGST will not replace the existing Central Sales Tax and is also not an extra added tax. It basically is the sum of Central GST (CGST) and State GST (SGST).
IGST = CGST + SGST
IGST will help in ensuring that the ultimate SGST is received by the state in which the goods and services are consumed since GST is a destination-based tax. It helps in achieving two main objectives -
- Prevent cascading effect, by allowing inter set off of state and central GST.
- Helps in fulfilling the principal of destination based consumption tax.
Features of IGST Model
- The sum of CGST and SGST.
- Levied on the Inter-state and the cross-border transactions of Goods and Services.
- There will be a uniform IGST rate across the country.
- Will be shared by the Centre and State.
- Interstate trader will pay IGST after adjusting the available input IGST, SGST and CGST on the transactions.
Advantages of IGST Model
- A simple, transparent and self-monitoring model.
- Maintenance of tax neutrality in the country.
- The overall tax paying process will be quick with no additional burdens on the taxpayer.
- No requirement for the physical verification of documents and claims as all the relevant data will be available on the GSTN server.
- As payment of tax will be on an online platform, the process will be easy and invulnerable to disputes and manipulations.
- Ensuring that the Input Tax Credit chain for the Interstate transactions is continuous.
- There will be no significant blockage of funds or an upfront payment of tax for the Interstate sellers and buyers.
- There will be no requirement of claiming refunds in the exporting State, as Input Tax Credit will be used up while paying the tax.
- Efficient management of ‘Business to Business’ (B2B) as well as ‘Business to Consumer’ (B2C) transactions.
- The uniformity in tax rates and simplified procedures in the country will also help in minimizing the cost of compliance.