IGST Act · Chapter VIII
Apportionment of Tax and Settlement of Funds
s. 17Apportionment of tax and settlement of funds
IGST is collected by the Centre, but GST is meant to accrue to the State where goods and services are consumed. Section 17 makes that happen: where IGST ends up as final tax — no credit is taken — the State share is moved to the destination State.
- Section 17 of the IGST Act, 2017 apportions IGST to the Centre and the States where it is not used as input tax credit — on supplies and imports to unregistered persons, composition taxpayers, persons not eligible for credit, and credit not availed in time.
- The Centre's share is the central tax rate on the supply; the balance goes to the State (or, for a Union territory, the Centre) where the supply takes place.
- Under section 17(2A), inserted from 01.02.2019, IGST not otherwise apportioned may, on the GST Council's recommendation, be split 50:50 between the Centre and the States, subject to later adjustment.
- Section 17 governs Government-to-Government settlement; it does not change the taxpayer's liability.
s. 17ATransfer of Certain Amounts
Section 17A is a settlement rule. A taxpayer can move a balance in its electronic cash ledger from one tax head to another — for example from IGST to State tax. Section 17A makes the Government move the money behind it, so the State actually receives what the taxpayer has paid into its head.
- Section 17A of the IGST Act, 2017, inserted by the Finance (No. 2) Act, 2019 with effect from 01.01.2020, requires the Government to transfer to the State or UT tax account an amount equal to IGST cash a taxpayer moves to the State or UT tax cash ledger.
- It is the Government-side counterpart of the taxpayer's power to transfer amounts between heads of the electronic cash ledger under section 49(10) of the CGST Act.
s. 18Transfer of input tax credit
A business can use IGST credit to pay its CGST or SGST. That is convenient for the taxpayer but leaves the money in the wrong Government account. Section 18 moves it: every rupee of IGST credit used to pay another tax is transferred to the account of that tax.
- Under section 18 of the IGST Act, 2017, when IGST credit is used to pay central tax, the amount is transferred from the IGST account to the central tax account.
- When IGST credit is used to pay State or UT tax, the amount is apportioned to the "appropriate State" — the State or UT where the taxpayer is registered or liable to be registered.
- The order in which IGST credit must be used is laid down in section 49 and section 49A of the CGST Act.
s. 19Tax wrongfully collected and paid
Section 19 handles the commonest classification error: treating an intra-State supply as inter-State, or the reverse. The taxpayer pays the right tax and gets back the wrong one — and owes no interest for the gap. Section 77 of the CGST Act is the mirror provision.
- Under section 19(1) of the IGST Act, 2017, IGST paid on a supply later held to be intra-State is refunded, on payment of the CGST and SGST or UTGST due.
- Under section 19(2), a person who paid CGST and SGST or UTGST on a supply later held to be inter-State pays IGST without interest.
- CBIC Circular 162/18/2021-GST clarified that "subsequently held" covers a taxpayer's own later correction, not only an officer's finding.
- The refund must be claimed within two years of paying the correct tax (Rule 89(1A) of the CGST Rules).