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.
Key points
- 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.
The provisions
17(1)The Centre's share where IGST becomes final tax
Statutory text
(1) Out of the integrated tax paid to the Central Government,-
(a) in respect of inter-State supply of goods or services or both to an unregistered person or to a registered person paying tax under section 10 of the Central Goods and Services Tax Act;
(b) in respect of inter-State supply of goods or services or both where the registered person is not eligible for input tax credit;
(c) in respect of inter-State supply of goods or services or both made in a financial year to a registered person, where he does not avail of the input tax credit within the specified period and thus remains in the integrated tax account after expiry of the due date for furnishing of annual return for such year in which the supply was made;
(d) in respect of import of goods or services or both by an unregistered person or by a registered person paying tax under section 10 of the Central Goods and Services Tax Act;
(e) in respect of import of goods or services or both where the registered person is not eligible for input tax credit;
(f) in respect of import of goods or services or both made in a financial year by a registered person, where he does not avail of the said credit within the specified period and thus remains in the integrated tax account after expiry of the due date for furnishing of annual return for such year in which the supply was received, the amount of tax calculated at the rate equivalent to the central tax on similar intra-State supply shall be apportioned to the Central Government.
17(2)–(2A)The balance to the destination State
Statutory text
(2) The balance amount of integrated tax remaining in the integrated tax account in respect of the supply for which an apportionment to the Central Government has been done under sub-section (1) shall be apportioned to the,-
(a) State where such supply takes place; and
(b) Central Government where such supply takes place in a Union territory:
Provided that where the place of such supply made by any taxable person cannot be determined separately, the said balance amount shall be apportioned to,-
(a) each of the States; and
(b) Central Government in relation to Union territories, in proportion to the total supplies made by such taxable person to each of such States or Union territories, as the case may be, in a financial year:
Provided further that where the taxable person making such supplies is not identifiable, the said balance amount shall be apportioned to all States and the Central Government in proportion to the amount collected as State tax or, as the case may be, Union territory tax, by the respective State or, as the case may be, by the Central Government during the immediately preceding financial year.
1[(2A). The amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent. to the Central Government and fifty per cent. to the State Governments or the Union territories, as the case may be, on ad hoc basis and shall be adjusted against the amount apportioned under the said sub-sections.]
1. Inserted by s. 7 of the Integrated Goods and Services Tax (Amendment) Act, 2018 (No. 32 of 2018) - Brought into force w.e.f. 01st February, 2019.
What it means
The balance goes to the State where the supply takes place — the place of supply — or to the Centre for a Union territory. If the place of supply cannot be determined for each supply, the balance is shared in proportion to the supplier's total supplies to each State in the year; if the supplier cannot be identified, in proportion to State tax collected.
Sub-section (2A), inserted from 01.02.2019, lets amounts not apportioned under (1) and (2) be split 50:50 between the Centre and the States on the Council's recommendation, as an interim measure subject to later adjustment.
17(3)–(5)Interest, penalty, and adjustments
Statutory text
(3) The provisions of sub-sections (1) and (2) relating to apportionment of integrated tax shall, mutatis mutandis, apply to the apportionment of interest, penalty and compounding amount realised in connection with the tax so apportioned.
(4) Where an amount has been apportioned to the Central Government or a State Government under sub-section (1) or sub-section (2) or sub-section (3),the amount collected as integrated tax shall stand reduced by an amount equal to the amount so apportioned andthe Central Government shall transfer to the central tax account or Union territory tax account, an amount equal to the respective amounts apportioned to the Central Government and shall transfer to the State tax account of the respective States an amount equal to the amount apportioned to that State, in such manner and within such time as may be prescribed.
(5) Any integrated tax apportioned to a State or, as the case may be, to the Central Government on account of a Union territory, if subsequently found to be refundable to any person and refunded to such person, shall be reduced from the amount to be apportioned under this section, to such State, or Central Government on account of such Union territory, in such manner and within such time as may be prescribed.
What it means
Interest, penalty and compounding amounts follow the tax they relate to. Amounts apportioned are deducted from the IGST account and transferred to the State or Central account; and if IGST already apportioned is later refunded, the refund is recovered from the share of the Government that received it.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Which State gets the IGST paid on an inter-State sale to a consumer?
- The State where the supply takes place — the place of supply. Under section 17 of the IGST Act the Centre keeps an amount equal to central tax and the balance goes to that State.
- Does section 17 affect what the taxpayer pays?
- No. It governs settlement between the Centre and the States.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
IGST that a registered buyer uses as credit is settled through section 18. Section 17 deals with IGST that is never credited: inter-State supplies and imports to unregistered persons and composition taxpayers, to registered persons not eligible for credit, and where credit is not availed within the specified period. Out of such IGST, the Centre takes an amount equal to central tax on the supply at the applicable rate.