Direct and Indirect Taxation · Levy and Collection of CGST and IGST

Levy and Collection of IGST under Section 5 of the IGST Act

Updated 10 October 2026 · Fact-checked

IGST is the tax levied under Section 5 of the IGST Act, 2017 on inter-State supplies of goods or services, and on imports. It is charged on the transaction value at the notified rate. Tax is paid by the supplier, by the recipient under reverse charge, or by the importer on imported goods. Fix the supplier's location first.

Understand Integrated Tax Levy and Collection under IGST Act

India taxes supplies of goods and services through GST. When a supply happens inside one State, two taxes apply: CGST to the Centre and SGST to the State. When a supply crosses State borders, only one tax applies: IGST, charged by the Centre. The IGST collected is then apportioned between the Centre and the destination State through the settlement mechanism under Section 17 of the IGST Act.

Section 5 of the IGST Act is the charging section. It says tax called integrated goods and services tax is levied on all inter-State supplies of goods or services, or both, except on the supply of alcoholic liquor for human consumption. It is charged on the value determined under Section 15 of the CGST Act, at rates notified by the Government on the recommendation of the GST Council, subject to a ceiling of 40%.

Under Section 5(2), IGST on petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel is levied only from the date notified on the recommendation of the GST Council. Until then, these are not charged to IGST.

Imports are treated as inter-State supplies. Import of goods into India is taxed with IGST, which is levied and collected as additional duty of customs under the Customs Tariff Act, 1975 on the value of the goods plus customs duty. The levy on imported goods does not depend on the importer being registered. Import of services is an inter-State supply, so IGST applies on it too. Where the Indian recipient is a taxable person, it is generally paid by that recipient under reverse charge. There are exceptions. For example, for online information and database access or retrieval (OIDAR) services supplied to a non-taxable recipient, the overseas supplier is responsible for the tax.

Supplies to or by a SEZ developer or unit, and supplies made in the course of import into India, are also treated as inter-State supplies. Because of this, IGST applies in cases that look local.

Collection follows CGST. The IGST Act applies the CGST Act's provisions on registration, invoices, returns, payment, refunds, assessment, audit, appeals and recovery, so you do not learn a second procedure. Only the head of tax and the ledger change. For supplies within India, the levy needs a taxable supply by a taxable person and a supply that is inter-State. Imports of goods are taxed at customs whether or not the importer is registered.

Key rules to remember

Charging rule for IGST: IGST = Value of supply (Section 15 CGST Act) × IGST rate; Applies to inter-State supplies. The IGST rate equals the CGST rate plus the SGST rate for the same item.
Rate structure: IGST rate = CGST rate + SGST rate (for example, 18% = 9% + 9%); Notified rate ceiling for IGST is 40%.
IGST on imported goods: Assessable value + basic customs duty (and other duties forming part of value) = Value for IGST; IGST = this value × IGST rate; Levied as additional duty of customs on the goods. Take the exact build-up given in the question.
Inter-State supply (goods or services): Location of supplier and place of supply are in different States or Union territories; Imports and supplies to or from a SEZ developer or unit are also inter-State supplies.
Exclusion and deferred levy: Alcoholic liquor for human consumption is outside IGST (Section 5(1)); Under Section 5(2), IGST on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel applies only from the date notified on the Council's recommendation.

How to solve Integrated Tax Levy and Collection under IGST Act questions

Use this order for any question on IGST levy and collection.

1Check whether there is a taxable supply by a taxable person in the course or furtherance of business, or an import.
2Identify the location of the supplier and the place of supply. State both clearly.
3If they are in different States or Union territories, or the supply is an import or involves a SEZ, call it an inter-State supply and IGST applies.
4If the supply is alcoholic liquor for human consumption, state it is outside IGST. If it is a petroleum product named in Section 5(2), state that IGST applies only from the notified date.
5Find the value of supply under Section 15 of the CGST Act. For imported goods, add customs duty as the question states.
6Apply the IGST rate. Do not add CGST and SGST on top of it.
7State who pays: the supplier, or the recipient under reverse charge, or the importer at customs.
8Mention that collection, returns and recovery follow CGST provisions, and conclude.

Quickest way: Two-location test

When to use it: Use in MCQs and short numerical questions where you must pick CGST plus SGST or IGST.

Write the supplier's State and the place of supply State.
Same State: CGST plus SGST. Different State: IGST.
Import or SEZ involved: IGST regardless of appearance.
Compute tax once at the full rate. For intra-State, split the rate equally.

Common mistakes in Integrated Tax Levy and Collection under IGST Act

Charging CGST and SGST because the buyer is a registered person in the same city as the head office
Students look at the buyer's address instead of the place of supply.
Fix: Decide by the supplier's location and the place of supply, not by where the parties meet or the head office.
Charging IGST at half the rate or adding CGST on top
Confusion between the split rate and the full rate.
Fix: IGST equals the combined CGST plus SGST rate. Charge only IGST on an inter-State supply.
Forgetting customs duty in the value for IGST on imported goods
Students apply the rate to invoice value alone.
Fix: Add the basic customs duty and other duties that form part of value before applying IGST, as given in the question.
Treating import of services as outside GST
The supplier is abroad and not registered in India.
Fix: Import of services is an inter-State supply, so IGST is payable. Where the Indian recipient is a taxable person, it generally pays under reverse charge. Exceptions exist, such as OIDAR services supplied to non-taxable persons.
Applying IGST to alcoholic liquor for human consumption
Students assume all inter-State supplies are taxed.
Fix: Remember the explicit exclusion in Section 5. State it when the facts mention liquor.
Learning a separate IGST procedure for returns and recovery
Students expect each Act to have its own machinery.
Fix: Write that the IGST Act applies the CGST Act's provisions for administration, so the procedure is the same.

Worked examples

Example 1

Sunrise Traders, Pune (Maharashtra), sells goods of ₹4,00,000 (value under Section 15) to Kumar Stores, Bengaluru (Karnataka). GST rate on the goods is 18%. Determine the tax payable and its nature.

Show the solution

Supplier's location is Maharashtra. Place of supply of goods moved to the buyer is Karnataka.
The two States are different, so this is an inter-State supply and IGST applies.
IGST rate = 18% (9% CGST + 9% SGST equivalent).
IGST = ₹4,00,000 × 18% = ₹72,000.
No CGST or SGST is charged. Collection and returns follow the CGST provisions.

Answer: IGST of ₹72,000 is payable on the inter-State supply; no CGST or SGST applies.

Example 2

Bharat Motors Ltd. imports a machine with assessable value ₹10,00,000. Basic customs duty is 10%. IGST rate on the machine is 18%. Compute the IGST payable on import. Assume no other duty applies.

Show the solution

Import of goods is an inter-State supply, so IGST is levied as additional duty of customs.
Basic customs duty = ₹10,00,000 × 10% = ₹1,00,000.
Value for IGST = ₹10,00,000 + ₹1,00,000 = ₹11,00,000.
IGST = ₹11,00,000 × 18% = ₹1,98,000.
IGST is paid at the time of import with customs duty.

Answer: IGST payable on import is ₹1,98,000.

Exam tips

In MCQs, spot the two States first. Most IGST questions are decided by that single check.
Quote Section 5 of the IGST Act for the levy, and mention the exclusion of alcoholic liquor for human consumption.
For imports, show the value build-up line by line so you earn step marks even if the rate is misread.
Write one closing line that collection follows the CGST Act. It is a frequent theory point.
Use the full IGST rate once. Never show a CGST and SGST split in an inter-State answer.

Practice questions from Levy and Collection of CGST and IGST

Integrated Tax Levy and Collection under IGST Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Integrated Tax Levy and Collection under IGST Act: frequently asked questions

What does Section 5 of the IGST Act provide?

It is the charging section. It levies IGST on inter-State supplies of goods or services, or both, on the value under Section 15 of the CGST Act, at notified rates not exceeding 40%. Alcoholic liquor for human consumption is excluded, and IGST on petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine fuel applies only from a notified date.

Is IGST payable on import of services?

Yes. Import of services is treated as an inter-State supply, so IGST applies. Where the Indian recipient is a taxable person, it generally pays under reverse charge. There are exceptions, such as OIDAR services supplied to non-taxable persons.

What is the difference between CGST, SGST and IGST?

CGST and SGST are charged together on intra-State supplies, one to the Centre and one to the State. IGST is charged by the Centre on inter-State supplies and imports. The IGST rate equals the CGST rate plus the SGST rate.

How is IGST collected on imported goods?

It is levied and collected as additional duty of customs on the value of the goods plus customs duty. It is paid at the time of import, and it does not depend on the importer being registered.