The Integrated Goods and Services Tax Act, 2017

What it does

The Act is the second of the Union's goods and services tax statutes. The Central Goods and Services Tax Act, 2017 and the State Acts tax a supply within a State. This Act taxes a supply between States, an import into India and an export out of it. A supply is a supply in the course of inter-State trade or commerce when the supplier is in one State and the place of supply is in another, and the Act provides that an import of goods or services and a supply to or by a special economic zone developer or unit are treated as inter-State supplies.

Because the tax goes to the Union, the Act has to say how it reaches the State that bears the cost. It does this through the place of supply, set out in a chapter of its own. The place of supply for goods is generally where they are delivered or where their movement ends, and for services the rules depend on the kind of service and on whether the supplier and the recipient are both in India. The Act also provides for the apportionment of the tax between the Union and the States and the settlement of credit across the two sets of taxes.

Who it binds

A registered person who makes a supply between States, an importer of goods or services, and an exporter. A person who is not resident in India but supplies online information and database access or retrieval services to a non-taxable person in India is within it too, with a simplified registration and a duty to pay the tax. For the machinery of registration, credit, returns, assessment and appeal, the Act applies the provisions of the central Act to inter-State supplies.

What has changed, and when

The Act took effect on 1 July 2017 with the other goods and services tax statutes. It has been amended by the Finance Acts and by the Integrated Goods and Services Tax (Amendment) Act, 2018, and the amendments to the central Act have generally been carried across. Rates are not in the Act. They are in notifications, which are amended often, and the rate notification for services is the one the site treats separately.

What turns on it in practice

Exports are zero-rated. An exporter of goods or services can supply without paying integrated tax under a bond or letter of undertaking and claim a refund of the credit that has built up, or pay the tax and claim a refund of it. The conditions for the refund, the time within which it must be claimed, and the evidence of export are where most export disputes arise.

Imports are charged under the same Act. Integrated tax on the import of goods is levied on the importer at the border together with customs duty, under this Act read with the Customs Tariff Act, 1975, so the customs assessment and the integrated tax are determined together. Imports of services are charged to the recipient under reverse charge in the cases the law provides.

The other recurring question is the place of supply. The same service may be treated as supplied in one State or another depending on the nature of the service and the location of the parties, and a supplier that applies the wrong rule charges the wrong tax, which is then a question of credit for the recipient. Advisory and litigation on goods and services tax, including disputes about the place of supply and refunds for exporters, is within the taxation work of this practice.