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06 Feb, 2026
By Online Legal India
Published On 06 Feb 2026
Category GST
The IGST Act 2017 is one of the key components of the GST tax. It offers seamless trade among states. Integrated GST Act 2017, ensures a fair tax collection while goods and services moves across state borders. It provides a uniform structure for interstate transactions. Section 16 of the IGST Act, 2017 defines 'zero-rated supply', which includes exports of goods/services and supplies to SEZ developers/units for authorized operations.
In this blog, you will learn about the IGST Act, 2017.
The IGST Act 2017 is a legislation under the Goods and Services Tax. It was passed by the government of India to regulate taxation. It applies to the movement of goods and services across state borders. Before the GST, India had a complex tax structure like Central Sales Tax (CST). For the interstate trade, it was a reason for confusion for the interstate states. However, the IGST Act 2017 ensures that there is no tax cascading. As a result, your business can claim the ITC seamlessly. This act effectively manages taxes on interstate transactions. This advocates for uniform tax collection and resolving disputes.
Before implementing the Goods and Services Tax, the interstate trade was subject to multiple taxes. The central sales tax was a reason for friction among many. It was not eligible for input tax credit. This results in cascading effects of taxes. Hence, for streamlining the process, the IGST Act was introduced in March 2017 under the GST law.
The main objective of the IGST Act was to integrate indirect taxation in India, reducing the complexity and enhancing the ease of doing business.
The pre-GST era was referred to as a tax on tax effect. You need to pay multiple indirect taxes. It includes VAT, Central excise, CST, Service tax, octroi and so on. The compliance was complex. This resulted in an increased tax burden overall.
Indian Constitution’s 101st Amendment took place in 2016. The Article 246A was inserted this year. It gives power to both the Central and State governments to legislate GST. Article 269A contains information on Integrated GST on Interstate supply.
The IGST Act came into being in 2017. It includes the State GST, Central GST and UTGST in July 2017. The entire GST regime was rolled out on 2017, 1st July. The Jammu and Kashmir implemented IGST shortly on July 8 2017. Gradually, the entire nation came under the GST Act and its respective sections.
Currently, the GST structure is simplified further. Major reforms (GST 2.0, effective Sept 22, 2025) simplified the structure to primarily 5% and 18% slabs, with 40% for luxury/sin goods, and 0% for certain essentials. The compliance is now digital. The adoption of automation makes it easier for the users.
The IGST Act 2017 gives rise to the Integrated Goods and Services Tax. The IGST applies to all kinds of supply or delivery of goods and services. Under the GST system, IGST is used for all transactions. It happens between different states, including goods and services that move outside a state. In the case of the point of supply, IGST applies to four types of supply transactions:
These are goods or services that move from one state to another. Or, from one union territory to another. IGST is charged on these transactions. The seller adds the tax to the sales invoice. Then, the tax is paid to the central government.
IGST is applied to goods and services that are brought into India. For imported goods, the central government of India adds IGST along with customs duties. However, exports are zero-rated under GST. This means the person exporting goods and services from India can pay IGST. They can get this tax back later after submitting shipping bills. It's also possible for an exporter to choose not to pay IGST. This is done through a letter of undertaking or LUT bond.
This refers to goods or services that are supplied outside India’s customs areas. The IGST Tax applies when goods or services are delivered to or from a Special Economic Zone. An example of this would be:
Suppose you are a dealer from MS/Iyer Electronics in Tamil Nadu (Chennai), and you are selling electronic items to MS/Banerjee Enterprise in West Bengal (Kolkata). In sending the goods from Tamil Nadu to Kolkata, the IGST is applied to the full value of the goods. It applies after the delivery. This tax is not applied if the same products are received within Tamil Nadu.
| Goods and Services | IGST Old Rates | New Rates |
|---|---|---|
| Semi-luxury items include ice cream, pasta, and capital goods | 18% | 18% |
| Luxury goods such as cars and durable consumer products; indulgence items | 28% | 40% |
| Essential everyday items and educational services | 5% | 0% |
| Processed and packaged foods, mobile phones, computers, and similar items | 12% | 5% |
IGST applies to goods or services sold from one state to another. It applies from one state to another Union Territory. The movement of goods from a Union Territory to a state also comes under this. The IGST Act 2017 mandates tax between two Union Territories.
Before GST, different states levied different taxes. It depends on the sales of goods. But now the IGST ensures that the same tax rate applies to these sales. It is equal throughout the entire country.
Businesses that purchase supplies from other states can claim a refund of the input tax credit. It applies to the IGST that they have already paid
Under the IGST Act 2017, the Central Government shares the revenue that belongs to the state. It includes the state where the supply takes place. Also, it is applicable where the goods are actually used.
After the implementation of the IGST Act 2017, it is important to understand the calculation of IGST. It benefits to know the amount one is paying. For instance:
A business from Kerala in the electronics industry receives an order worth 100,000. They have to deliver it to a customer in Mumbai.
The formula: the sales price multiplied by the IGST rate gives you the IGST amount. The GST rate for electronics like laptops is 18%, so that's the rate we'll use here. Once you calculate the IGST, you add it to the original sales price to get the total amount. So, 100,000 plus (100,000 times 18%) equals 118,000. Out of this total of 118,000, 18,000 is the IGST. The central government will take 50% of this, which is 9,000. The remaining 9,000 will go to the Maharashtra government's GST.
IGST, under the IGST Act 2017, offers several benefits. These are as follows:
Firstly, the process is transparent. One can monitor it for the states and the central government.
Secondly, IGST creates a tax-neutral business across India. It has been possible under the IGST Act 2017. The lesser tax burden helps in scaling faster.
Thirdly, the indirect taxes were a reason for dispute and confusion. People often misinterpret tax revenue and its impact.
Fourthly, the equal tax rate reduces the overall tax burden. Hence, the cost of compliance is also less for customers.
Lastly, a registered business can claim ITC. The purchase input makes the tax claim easier.
Closing Section
The IGST Act 2017 offers smooth interstate commerce in India. It simplifies the tax structure and eliminates barriers for interstate trade. It benefits by giving seamless ITC transfers. The uniform tax structure helps to reduce the tax burden. Hence, the business can scale and grow in its own way. For more information, connect with Online Legal India today.
FAQs
1. Does the IGST Act 2017 allow to claim of ITC?
Yes, IGST under the IGST Act 2017 allows you to claim ITC.
2. What is IGST?
IGST is a form of GST. It is imposed on the interstate supply of goods and services.
3. Are IGST and CGST the same?
No, IGST and Central GST are not the same. IGST applies to interstate supplies, and CGST is for intrastate supplies.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.
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