Integrated GST (IGST)

Integrated GST (IGST) is the destination-based tax levied on inter-state supplies of goods and services within India and on imports into Indian territory, administered under the Integrated Goods and Services Tax Act, 2017. Its constitutional foundation is the Constitution (One Hundred and First Amendment) Act, 2016, which inserted Article 269A empowering the Government of India to levy and collect tax on supplies in the course of inter-state trade or commerce, and Article 246A conferring concurrent legislative competence on the Union and the States over GST. The IGST Act received presidential assent on 12 April 2017, and the levy took effect alongside the rest of the GST regime on 1 July 2017. Section 5 of the IGST Act is the charging provision, authorising the Centre to levy IGST at rates recommended by the GST Council under Article 279A and notified by the Union government.

The procedural mechanics rest on a single combined levy that equals the sum of the Central GST (CGST) and State GST (SGST) rates applicable to the same supply made intra-state. When a registered supplier in one state sells to a buyer in another, the supplier charges IGST on the invoice, collects it, and deposits it with the Union exchequer through the GST Network (GSTN) portal. The location of supply rules in Chapter V of the IGST Act—Sections 10 through 14—determine whether a transaction is inter-state or intra-state by fixing the "place of supply," which in most goods transactions is the location where movement terminates for delivery. Because IGST is destination-based, the revenue ultimately accrues to the state where the goods or services are consumed, not where they originate.

A defining feature is the input tax credit (ITC) cross-utilisation chain that makes IGST the linchpin of a seamless national credit system. Under Section 49 of the CGST Act and the IGST Act's settlement provisions, IGST credit may be set off first against IGST liability, then against CGST, and finally against SGST, in that statutory order. This fungibility eliminates the cascading of taxes that plagued the pre-2017 Central Sales Tax regime, where inter-state credit was largely non-creditable. The Union, acting as a clearing house, periodically settles accounts: the IGST collected on a supply consumed in a destination state is transferred to that state's SGST account, and credits used across the CGST–SGST boundary are reconciled between the Centre and states through the fund settlement mechanism prescribed under Article 269A and Sections 17 and 18 of the IGST Act.

In contemporary administration, the GST Council—chaired by the Union Finance Minister and comprising the finance ministers of the states—meets in New Delhi to recommend IGST rates, exemptions, and place-of-supply clarifications. Imports illustrate the levy plainly: when goods enter through, for instance, the Jawaharlal Nehru Port in Maharashtra, the Central Board of Indirect Taxes and Customs (CBIC) collects IGST under Section 3(7) of the Customs Tariff Act, 1975, in addition to the basic customs duty, and the importer claims the IGST as input credit. Recurring disputes over the apportionment of un-settled IGST balances—the so-called "IGST pool"—have repeatedly surfaced in Council deliberations, notably during 2018–2019 when the Comptroller and Auditor General flagged delayed devolution of accumulated IGST to states.

IGST must be distinguished from its sibling levies. CGST and SGST apply to intra-state supplies, are levied concurrently on the same transaction, and accrue separately to the Union and the relevant state. UTGST (Union Territory GST) substitutes for SGST in union territories without a legislature. IGST, by contrast, is a unified levy on movement across state borders, and it is the only GST component that the Centre apportions to destination states rather than retaining. It is also distinct from the GST Compensation Cess, levied under the GST (Compensation to States) Act, 2017, which is an additional cess on specified luxury and demerit goods earmarked to compensate states for revenue shortfall, not a credit-fungible component of the core tax.

Edge cases and controversies persist. The treatment of "bill-to-ship-to" transactions, intermediary services under Section 13(8)(b), and the place of supply for online information and database access services (OIDAR) have generated litigation, including the Gujarat High Court's scrutiny of the intermediary provision. The taxation of "ocean freight" on imports under reverse charge was struck down by the Supreme Court in Union of India v. Mohit Minerals (2022), which held the levy unconstitutional and affirmed that GST Council recommendations are not binding on the Union and states—a ruling with significant federal implications. Ongoing reforms address the apportionment of provisional IGST settlements and the periodic rate rationalisation exercises the Council continues to debate.

For the working practitioner—whether a UPSC aspirant preparing General Studies Paper III, a desk officer analysing centre–state fiscal relations, or a trade-policy researcher—IGST exemplifies cooperative federalism in India's indirect tax architecture. It resolves the constitutional puzzle of taxing inter-state commerce without erecting fiscal barriers between states, sustains a unified national market, and channels revenue to the point of consumption. Understanding its charging provisions, place-of-supply rules, and settlement mechanism is indispensable for anyone analysing India's public finance, customs administration, or the evolving jurisprudence of the GST Council's recommendatory authority.