III
IGST Act · Chapter III
Levy and Collection of Tax
2 sections authoredIGST Act, 2017
s. 5Levy and collection
Section 5 is the IGST charging section. Every IGST liability traces to one of its five sub-sections: what is taxed, on what value, at what rate, and who pays.
- Section 5(1) of the IGST Act, 2017 levies IGST on every inter-State supply of goods or services at notified rates not exceeding 40%, on the value under section 15 of the CGST Act.
- IGST on imported goods is collected by customs under section 3(7) of the Customs Tariff Act, 1975 (proviso to section 5(1)); imported services are charged under section 5(1) itself.
- IGST on petroleum crude, diesel, petrol, natural gas and aviation turbine fuel is deferred until the Government notifies a date (section 5(2)); none has been notified.
- Under sections 5(3) and 5(4) the recipient pays on reverse charge for notified supplies; under section 5(5) the e-commerce operator pays for notified services.
- In Union of India v Mohit Minerals (2022) the Supreme Court held that IGST cannot be levied again under reverse charge on ocean freight in a CIF import already taxed at customs.
s. 6Power to grant exemption from tax
Section 6 is the exemption power that sits alongside the charge in section 5. It works in three ways — a general notification, a special order for an exceptional case, and a clarifying Explanation added within a year — and ends with a rule against collecting tax on absolutely exempt supplies.
- Section 6(1) of the IGST Act, 2017 lets the Government, on the GST Council's recommendation, exempt goods or services generally by notification, absolutely or with conditions, wholly or partly.
- The main IGST exemption notifications are 2/2017-Integrated Tax (Rate) for goods and 9/2017-Integrated Tax (Rate) for services, both dated 28.06.2017.
- Section 6(3) allows a clarifying Explanation to be inserted within one year of the notification or order; it takes effect as if it had always been part of it.
- Where an exemption is absolute, the supplier may not collect tax above the effective rate (Explanation to section 6).
- An ambiguous exemption notification is read in favour of the Revenue, and the burden of bringing a case within it is on the taxpayer — Commissioner of Customs v Dilip Kumar & Co (2018), Constitution Bench.