GST

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C.A Alok Mukherjee (Querist)
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18 November 2009 Suppose, Mr X of State B is purchasing an input amounting Rs 1000 from State A for which he has paid IGST say 10% i.e Rs 100. Now this input is used in his finished product Y which is sold only in State B. Previously, Y was excise exempted. Whether 1. he may be paid CGST and SGST for this or only SGST? if SGST, can he set off the IGST of Rs 100 from his SGST?

Vishnu Saboo

Vishnu Saboo (Expert)
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02 December 2009 Source: First Discussion Paper On Goods and Services Tax In India, Issued By: The Empowered Committee of State Finance Ministers, New Delhi, Dated: November 10, 2009

1.5 Inter-State Transactions of Goods and Services
The Empowered Committee has accepted the recommendations of the Working Group of concerned officials of Central and State Governments for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The major advantages of IGST Model are:
a) Maintenance of uninterrupted ITC chain on inter- State transactions.
b) No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer.
c) No refund claim in exporting State, as ITC is used up while paying the tax.
d) Self monitoring model.
e) Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously.
f) As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially.
g) Model can take â€˜Business to Businessâ€™ as well as â€˜Business to Consumerâ€™ transactions into account