IGST vs CGST vs SGST: Differences, Uses & Examples for Students
IGST Full Form stands for Integrated Goods and Services Tax. IGST is an essential term for students preparing for commerce, law, or government-related exams, and it forms one of the three core components of the Goods and Services Tax (GST) system in India. Knowing the full form and its usage enhances your understanding of taxation, especially when dealing with goods or services traded between two different states.
What is IGST?
IGST, or Integrated Goods and Services Tax, is a tax levied on the supply of goods and services when their movement occurs from one state to another in India. This is known as inter-state supply. The tax collected under IGST is managed by the central government, which then shares a part of it with the destination state (the state where the goods or services are ultimately consumed).
Why is IGST Important?
IGST is crucial for fair revenue distribution between state and central governments. Unlike intra-state transactions (where CGST and SGST are levied), inter-state transactions use IGST to ensure there is no double taxation and the entire process remains straightforward and efficient for both buyers and sellers. This process helps determine revenue sharing between different governments without causing confusion or overlap in tax collection.
Components Under GST
| Short Form | Full Form | Applicable on | Collected by |
|---|---|---|---|
| IGST | Integrated Goods and Services Tax | Inter-State supply of goods/services | Central Government (shared with State) |
| CGST | Central Goods and Services Tax | Intra-State supply | Central Government |
| SGST | State Goods and Services Tax | Intra-State supply | State Government |
How Does IGST Work? (With Example)
Consider a situation where a trader in Delhi sells goods to a trader in Maharashtra. The Delhi trader adds IGST to the invoice. Suppose the value of the goods is ₹50,000 and IGST is 18%, the total IGST becomes ₹9,000. The Delhi trader collects ₹59,000 (₹50,000 + ₹9,000) from the Maharashtra trader and deposits the IGST to the central government. The central government keeps its share and passes the state’s portion to Maharashtra.
Key Features and Benefits of IGST
- IGST helps avoid tax on tax, thus removing double taxation.
- It facilitates a smooth flow of input tax credit across states.
- IGST ensures the tax reaches the destination state, supporting fair revenue distribution.
Real-Life Application of IGST
IGST is applied every time goods or services cross state boundaries in India, such as in e-commerce sales, industrial transfers, or when businesses expand their supply chains across states. When you see taxes on invoices from sellers in different states, that is often IGST.
Difference Between IGST, CGST, and SGST
| Criteria | IGST | CGST | SGST |
|---|---|---|---|
| Applied On | Inter-State Supply | Intra-State Supply | Intra-State Supply |
| Collected By | Central Government | Central Government | State Government |
| Who Gets Final Share? | Destination State | Central Government | Same State Government |
How IGST Helps in Practical Scenarios
- Eliminates tax cascading by allowing input tax credit across state borders.
- Ensures that revenue belongs to the state where goods/services are finally consumed.
- Makes tracking and compliance easier for businesses engaged in pan-India trade.
Things to Remember About IGST
- IGST is always paid to the central government first, who then distributes the share to the appropriate state.
- IGST equals the sum of CGST and SGST for the same taxable supply.
- IGST rate is not fixed—check the applicable rate for each product or service.
Full Form in Multiple Indian Languages
| Language | Translation |
|---|---|
| Hindi | एकीकृत वस्तु एवं सेवा कर |
| Tamil | ஒன்றுபட்ட பொருட்கள் மற்றும் சேவைகள் வரி |
| Marathi | एकत्रित वस्तू आणि सेवा कर |
| Gujarati | એકીકૃત માલ અને સેવા કર |
| Malayalam | ഏകീകരിച്ച ചരക്ക് സേവന നികുതി |
Next Steps and Practice
To understand IGST in-depth, review GST-related concepts and full forms such as CGST and SGST. Practice calculations and clear your fundamental taxation doubts for a strong foundation in exams and future business scenarios. For additional learning, visit specialized commerce study guides and practice modules on Vedantu.
- Explore GST concepts and business basics on Vedantu’s Commerce section.
- Test your knowledge with mock questions and practical examples in the Practice Section.
- Enhance your understanding by covering more full forms and their usage in the current GST regime.
Remember, a thorough understanding of IGST and its application is vital for academic success, business decision-making, and excelling in competitive exams.
FAQs on IGST Full Form Explained: Integrated Goods and Services Tax
1. What is the full form of IGST?
IGST stands for Integrated Goods and Services Tax. It is a tax levied on inter-state supply of goods and services in India under the GST regime. This tax is collected by the central government and later apportioned between the center and the state where consumption occurs.
2. What is IGST and when is it applicable?
IGST (Integrated Goods and Services Tax) is applicable on inter-state transactions of goods and services and on imports/exports. It is charged when:
- Goods or services move from one state/union territory to another
- Goods are imported into India
- Exports also involve IGST, with refunds for exporters
3. What is the difference between IGST, CGST, and SGST?
IGST is levied on inter-state supply, CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) are levied on intra-state supplies. Key points:
- IGST: Inter-state, collected by Center, then shared
- CGST: Within the same state, collected by Center
- SGST: Within the same state, collected by State Government
4. Is IGST always charged at 18%?
No, IGST is not always 18%. The rate of IGST depends on the GST slab applicable to the specific goods or services. IGST rate equals CGST plus SGST for the item and can be 0%, 5%, 12%, 18%, or 28%.
5. How is IGST calculated?
IGST is calculated by applying the applicable rate on the value of inter-state supply. Formula:
- IGST = Value of goods/services × IGST Rate (%)
- The rate depends on the HSN/SAC code as per GST law
6. Can IGST be adjusted against CGST or SGST in GST returns?
Yes, IGST input tax credit can be adjusted first against IGST output liability, then CGST, and lastly SGST/UTGST. Cross-utilization rules are defined in the GST Act to optimize taxpayer's credits.
7. Who gets the revenue collected from IGST?
IGST revenue is first credited to the Central Government. It is then apportioned between the central and destination (consuming) state governments as per GST rules. The consuming state ultimately receives its share.
8. Give an example of IGST application in practice.
Example: If a seller in Maharashtra sells goods worth ₹50,000 to a buyer in Karnataka and the IGST rate is 18%, the IGST collected will be ₹9,000. The seller deposits this with the central government, which then distributes the appropriate share to Karnataka.
9. What is the importance of IGST for exams like CA, CBSE, SSC, or banking?
IGST is frequently asked in commerce and competitive exams. Understanding its full form, calculation, usage, and differences from CGST/SGST is crucial for high marks in CA Foundation, CBSE, SSC, and banking exams. Questions can be MCQs, theory, or numerical-based.
10. What happens if IGST is wrongly paid instead of CGST/SGST, or vice versa?
If IGST is wrongly paid under the wrong head, refund mechanisms exist as per GST rules. Taxpayers can claim a refund and re-deposit the amount in the correct tax head to rectify such mistakes, subject to procedural compliance.
11. Can IGST be refunded to exporters or foreign tourists?
Yes, IGST paid on exports is generally refunded to exporters as exports are zero-rated under GST. Foreign tourists may claim IGST refund for goods taken out of India, as per GST law provisions for non-residents.
12. What are the main features of IGST?
Main features of IGST include:
- Applicable to inter-state and import/export transactions
- Collected by the Center, apportioned to states
- Prevents double taxation on interstate supplies
- Input tax credit allowed across states
