New
Published on:
February 20, 2023
By
Paramita

The Effects of Charging IGST in Place of CGST and SGST for Zero-rated Supplies

Zero Rated Supply is a term used to describe the supply of goods and services that are exempt from the Goods and Services Tax (GST) but the input tax credit can be claimed. In simpler terms, this means that businesses do not have to pay GST on zero-rated supplies but can claim a refund on the GST paid on the inputs used to produce these supplies. This article aims to explore the effects of charging IGST in place of CGST and SGST for zero-rated supplies.

Under the GST regime, there are three types of supplies – Taxable, Exempt, and Zero-rated. Taxable supplies are those that are subject to GST, while Exempt supplies are not subject to GST at all. Zero-rated supplies, on the other hand, are those that are taxable under GST but are taxed at 0%. This means that businesses are not required to pay GST on these supplies, but they are allowed to claim a refund on the GST paid on the inputs used to produce these supplies.

CGST, SGST, and IGST

Under GST, taxes are levied at two levels – the Central and State levels. The taxes levied by the Central Government are called Central GST (CGST), and those levied by the State Governments are called State GST (SGST). When the supply of goods and services involves the movement of goods across state borders, Integrated GST (IGST) is charged. In such cases, the tax collected is then shared between the Central and State Governments based on the destination of the goods.

Zero-rated Supplies and IGST

When businesses supply goods and services that are zero-rated under GST, they are not required to pay any GST on these supplies. However, they are allowed to claim a refund on the GST paid on the inputs used to produce these supplies. This refund can be claimed either through the input tax credit mechanism or by submitting a refund claim with the GST authorities.

When IGST is charged on zero-rated supplies instead of CGST and SGST, it simplifies the refund process for businesses. This is because IGST is a single tax that is charged on these supplies, and businesses can claim a refund of the entire tax paid on the inputs used to produce these supplies. This can lead to a quicker and more streamlined refund process for businesses.

The Effects of Charging IGST in Place of CGST and SGST

Charging IGST in place of CGST and SGST for zero-rated supplies can have several effects. Some of these effects are discussed below:

1. Increased Cash Flow

Charging IGST for zero-rated supplies can lead to increased cash flow for businesses. This is because businesses will no longer have to pay CGST and SGST on these supplies, which can free up funds that can be used for other purposes. Additionally, since IGST is charged as a single tax, the refund process can be quicker, which can further increase cash flow for businesses.

2. Simplified Refund Process

As mentioned earlier, charging IGST for zero-rated supplies can simplify the refund process for businesses. Since the entire tax is charged as IGST, businesses can claim a refund of the entire tax paid on the inputs used to produce these supplies. This can lead to a quicker and more streamlined refund process for businesses.

3. Reduced Compliance Burden

Charging IGST for zero-rated supplies can also reduce the compliance burden on businesses. This is because businesses will only have to deal with a single tax instead of two separate taxes (CGST and SGST). This can simplify the tax compliances for businesses and reduce the costs associated with tax compliance.

4. Increased Efficiency

Charging IGST for zero-rated supplies can lead to increased efficiency for businesses. This is because the refund process can be quicker and more streamlined, which can free up time and resources that can be used for other purposes. Additionally, since businesses will only have to deal with a single tax instead of two separate taxes (CGST and SGST), this can simplify the tax compliances and reduce the time and resources spent on tax compliance.

Conclusion

Charging IGST in place of CGST and SGST for zero-rated supplies can have several benefits for businesses. It can lead to increased cash flow, simplify the refund process, reduce the compliance burden, and increase efficiency. However, it is important to note that these effects may vary depending on the specific circumstances of each business. Therefore, businesses should carefully consider the effects of charging IGST for zero-rated supplies before making any decisions.

Suggestions



DOLLS - GST RATES HSN CODE 9502
GST RATES HSN CODE 1520 - GLYCEROL CRUDE
Reverse Charge Mechanism u/s 9 (4) - Double collection of GST

Updated on:
March 16, 2024