IGST (Integrated Goods and Services Tax)
IGST (Integrated Goods and Services Tax)
IGST — Integrated Goods and Services Tax — is the tax charged on all supplies that cross a state or Union Territory boundary. When a business in Karnataka sells to a buyer in Maharashtra, or when a freelancer in Delhi invoices a client in Tamil Nadu, the applicable tax is IGST — not CGST and SGST. The Central Government collects IGST in full, then apportions the destination state's share to that state using GSTN's settlement mechanism.
IGST is governed by the Integrated Goods and Services Tax Act, 2017, a separate statute from the CGST and SGST Acts, though all three are part of the same GST framework introduced on 1 July 2017.
The core principle is simple: same tax rate, different collection route. A 18% service supplied within Karnataka attracts 9% CGST + 9% SGST. The identical service supplied from Karnataka to a client in Delhi attracts 18% IGST — the combined rate, collected as a single levy by the Centre rather than split between Centre and the supplier's state.
Quick reference
| Full form | Integrated Goods and Services Tax |
| Governing Act | Integrated Goods and Services Tax Act, 2017 |
| Levied by | Central Government |
| Applies to | Inter-state supplies, imports into India, exports (zero-rated), SEZ supplies |
| IGST rate | Equal to the total GST rate (CGST rate + SGST rate) for that supply |
| Who collects | Centre collects, then distributes consuming state's share to that state |
| ITC of IGST can pay | IGST first, then CGST, then SGST (in that order) |
| IGST on exports | Zero-rated — effectively nil (via LUT route) or paid and refunded (Rule 96) |
| IGST on imports | Charged at the port of entry in addition to Basic Customs Duty |
| Trigger rule | Place of supply ≠ state of supplier → charge IGST |
IGST vs CGST vs SGST: the three taxes compared
GST in India is not a single tax — it is a dual-levy system where Centre and states tax the same transaction simultaneously. IGST is the single-levy version for cross-border transactions within India.
| CGST | SGST / UTGST | IGST | |
|---|---|---|---|
| Full form | Central Goods and Services Tax | State / Union Territory GST | Integrated Goods and Services Tax |
| Levied by | Central Government | State Government / UT | Central Government |
| Applies to | Intra-state supplies | Intra-state supplies | Inter-state supplies, imports, exports |
| Rate | Half the total GST rate | Half the total GST rate | Full GST rate (= CGST + SGST combined) |
| Example at 18% | 9% CGST | 9% SGST | 18% IGST |
| Revenue goes to | Centre | Supplier's state | Centre → apportioned to consuming state |
| On same invoice? | Yes — charged alongside SGST | Yes — charged alongside CGST | No — replaces CGST + SGST |
| ITC can offset | IGST, CGST liabilities | IGST, SGST liabilities | IGST, CGST, SGST liabilities |
The key rule: CGST and SGST are never charged on the same invoice as IGST. A Tax Invoice carries either (CGST + SGST) or IGST — never a combination of all three on the same line item.
When does IGST apply: the place of supply rule
The decision to charge IGST versus CGST + SGST rests entirely on the place of supply — the GST concept that determines where a transaction is deemed to have occurred.
The rule: If the supplier's state and the place of supply are different → charge IGST. If they are the same → charge CGST + SGST.
For goods
The place of supply for goods is generally the location where the goods are delivered.
| Scenario | Place of supply | Tax charged |
|---|---|---|
| Bengaluru seller delivers to Bengaluru buyer | Karnataka | CGST + SGST (Karnataka) |
| Bengaluru seller delivers to Mumbai buyer | Maharashtra | IGST |
| Bengaluru seller delivers to buyer in same city but different branch | Karnataka (same state) | CGST + SGST |
| Goods exported out of India | Outside India | IGST (zero-rated) |
For services
The place of supply for services follows a more complex set of rules under Section 12 (B2C services) and Section 13 (services to/from outside India) of the IGST Act. The general rule for B2B services:
| Scenario | General rule | Tax charged |
|---|---|---|
| Delhi consultant → Delhi company | Delhi = supplier, Delhi = recipient → same state | CGST + SGST |
| Delhi consultant → Mumbai company (B2B) | Place of supply = Mumbai (location of registered recipient) | IGST |
| Delhi consultant → unregistered individual in Mumbai (B2C) | Place of supply = Delhi (location of supplier) | CGST + SGST (Delhi) |
| Indian freelancer → foreign client (export of service) | Place of supply = outside India | IGST (zero-rated) |
The B2B vs B2C difference matters for services. For B2B services, the place of supply is the state where the recipient is GST-registered — so a Delhi consultant billing a registered Mumbai company charges IGST. For B2C services to unregistered individuals, the place of supply defaults to the supplier's state — so the same Delhi consultant billing an unregistered individual in Mumbai charges CGST + SGST (Delhi). The buyer's GSTIN on the invoice is what switches the tax type.
How to read a GSTIN to determine IGST vs CGST+SGST
The quickest practical shortcut: compare the first two digits of your GSTIN with the first two digits of your client's GSTIN.
| Your GSTIN | Client's GSTIN | Match? | Tax type |
|---|---|---|---|
| 29XXXXX (Karnataka) | 29XXXXX (Karnataka) | Same state | CGST 9% + SGST 9% |
| 29XXXXX (Karnataka) | 27XXXXX (Maharashtra) | Different state | IGST 18% |
| 07XXXXX (Delhi) | 07XXXXX (Delhi) | Same state | CGST 9% + SGST 9% |
| 07XXXXX (Delhi) | 33XXXXX (Tamil Nadu) | Different state | IGST 18% |
This rule applies to both goods and B2B services. For B2C services to unregistered individuals, always charge CGST + SGST based on your own registration state.
IGST rates
IGST rates directly mirror the total GST rate applicable to each category of supply. Under GST 2.0 (effective 22 September 2025):
| Total GST rate | IGST rate | Equivalent intra-state rate |
|---|---|---|
| 0% (nil-rated) | 0% | CGST 0% + SGST 0% |
| 3% | 3% | CGST 1.5% + SGST 1.5% (gold, silver, jewellery) |
| 5% | 5% | CGST 2.5% + SGST 2.5% |
| 18% | 18% | CGST 9% + SGST 9% (most services, most goods) |
| 28% | 28% | CGST 14% + SGST 14% (tobacco, pan masala; retained temporarily) |
| 40% | 40% | CGST 20% + SGST 20% (new luxury/sin slab from Sept 2025) |
The 12% slab was largely abolished under GST 2.0. Most goods that were at 12% moved to 5% or 18%.
ITC utilization: how IGST credit is set off
IGST credit is the most flexible ITC you can hold — it can be used against IGST, CGST, and SGST liabilities. The set-off order (statutory position, effective June 2026):
| ITC available | Can be used to pay | Cannot be used to pay |
|---|---|---|
| IGST credit | IGST first → CGST next → SGST last | — (can pay all three) |
| CGST credit | CGST first → IGST next (after CGST exhausted) | SGST |
| SGST credit | SGST first → IGST next (after SGST exhausted, and after CGST ITC is also exhausted) | CGST |
The cross-utilisation prohibition: CGST credit can never offset SGST liability, and SGST credit can never offset CGST liability. This is an absolute restriction under Section 49(5) of the CGST Act.
IGST first, always: Before any CGST or SGST credit can be applied to IGST liability, all available IGST credit must be exhausted first. This sequence cannot be bypassed.
2026 rule update: In January 2026, GSTN briefly permitted flexible ordering — allowing taxpayers to apply CGST or SGST credit to IGST in any sequence after IGST ITC was exhausted. However, the GST portal reverted to the statutory position (CGST before SGST for IGST payment) in April 2026, following GSTN Advisory 649. As of June 2026, the portal enforces: IGST ITC → CGST ITC → SGST ITC for paying IGST liability.
IGST on exports: zero-rated supplies
Exports are zero-rated supplies under Section 16 of the IGST Act — meaning the effective IGST rate is nil. This ensures Indian exporters are not burdened by GST on goods and services supplied to foreign buyers.
There are two routes for an Indian exporter:
Route 1 — Export under LUT (no IGST paid)
File a Letter of Undertaking (LUT) in Form GST RFD-11 on the GST portal before making the export. Once the LUT is active, raise Tax Invoices for export with "Export under LUT — IGST Nil" and charge 0% IGST. Claim a refund of ITC accumulated on your inputs and input services under Rule 89 of the CGST Rules.
- LUT is valid for one financial year (1 April to 31 March)
- Most exporters choose this route — no cash outflow, refund of input ITC
- 90% provisional refund within 7 days of acknowledgment under Section 54(6)
Route 2 — Pay IGST on export, claim refund
Charge IGST on the export invoice, deposit it, and file for a full refund later under Rule 96. The refund is triggered by matching the shipping bill with the GSTR-1 data. This route involves a cash flow burden (IGST paid upfront) but may suit smaller exporters who do not have accumulated ITC to claim.
| LUT Route (Rule 89) | IGST Route (Rule 96) | |
|---|---|---|
| IGST charged on invoice | Nil | Yes, at applicable rate |
| Cash outflow | None | IGST paid first, refunded later |
| What is refunded | ITC on inputs/input services | IGST paid on export |
| Refund mechanism | Manual application on portal | Automatic via shipping bill + GSTR-1 match |
| Who should use it | Most exporters with input ITC | Exporters with minimal input ITC |
IGST on imports
When goods enter India, IGST is levied at the port of entry in addition to Basic Customs Duty (BCD) and other applicable charges. The IGST is charged on the assessable value + BCD + any other applicable duties — i.e., IGST is calculated on the CIF value plus customs duties, not just the invoice value.
Import IGST calculation example:
- CIF value of imported goods: ₹1,00,000
- Basic Customs Duty (BCD) at 10%: ₹10,000
- Assessable value for IGST: ₹1,10,000
- IGST at 18%: ₹19,800
- Total payment at customs: ₹10,000 (BCD) + ₹19,800 (IGST) = ₹29,800
The ₹19,800 IGST paid at customs is claimable as ITC (in Table 4A(1) of GSTR-3B) by GST-registered importers — provided the goods are used for business purposes and not blocked under Section 17(5).
IGST and SEZ supplies
Supplies to Special Economic Zones (SEZs) and EOU (Export-Oriented Units) are treated as zero-rated inter-state supplies under Section 16 of the IGST Act, similar to exports. The supplier either:
- Supplies without IGST under a valid LUT/Bond and claims ITC refund, or
- Pays IGST and the SEZ unit claims a refund using the endorsed invoice and supply statement
SEZ supplies are always IGST transactions — never CGST + SGST — regardless of whether the SEZ is located in the same state as the supplier.
Practical example: Priya's inter-state and intra-state invoices
Priya is a UX design consultant registered in Bengaluru, Karnataka (GSTIN starting with 29). In April 2026, she raises three invoices:
| Invoice | Client | Client GSTIN | State | Service value | Tax type | Tax calculation |
|---|---|---|---|---|---|---|
| INV-001 | Bengaluru startup | 29XXXXX | Karnataka | ₹1,00,000 | CGST + SGST | CGST 9% = ₹9,000 + SGST 9% = ₹9,000 |
| INV-002 | Delhi fintech firm | 07XXXXX | Delhi | ₹1,50,000 | IGST | IGST 18% = ₹27,000 |
| INV-003 | US-based SaaS company | — (no GSTIN, foreign) | Outside India | ₹2,00,000 | IGST (zero-rated, under LUT) | IGST 0% = ₹0 |
In GSTR-3B for April 2026:
- Table 3.1(a): ₹1,00,000 (intra-state, Karnataka) → CGST ₹9,000 + SGST ₹9,000
- Table 3.1(a): ₹1,50,000 (inter-state, Delhi) → IGST ₹27,000
- Table 3.1(b): ₹2,00,000 (zero-rated export under LUT) → IGST ₹0
- Total output: IGST ₹27,000 + CGST ₹9,000 + SGST ₹9,000
ITC for the month: Priya has IGST credit of ₹5,000 from a software subscription (import of service, RCM) and CGST credit of ₹900 + SGST credit of ₹900 from office supplies.
She uses:
- ₹5,000 IGST credit → first against IGST liability → IGST payable reduces to ₹22,000
- ₹900 CGST credit → against CGST liability → CGST payable = ₹8,100
- ₹900 SGST credit → against SGST liability → SGST payable = ₹8,100
Net cash payment: ₹22,000 + ₹8,100 + ₹8,100 = ₹38,200
For INV-003 (zero-rated export under LUT), Priya can claim a refund of ITC attributable to that invoice — the ₹0 IGST means no cash refund of IGST itself, but accumulated ITC on inputs used for the export supply is refundable under Rule 89.
Common IGST mistakes
Charging CGST + SGST on an inter-state supply. If you are in Karnataka and invoice a registered company in Delhi, you must charge IGST — not CGST + SGST. Charging the wrong tax type means the buyer cannot claim ITC correctly, you may have deposited tax to the wrong government, and corrections require credit notes and fresh invoices.
Charging IGST on a B2C intra-state supply. The reverse error — charging IGST when both you and an unregistered customer are in the same state. The place of supply for B2C services defaults to the supplier's state, making it an intra-state supply taxable under CGST + SGST.
Not checking the buyer's GSTIN before invoicing. Whether an invoice gets IGST or CGST+SGST depends on the buyer's registered state, which you can only know from their GSTIN. Always collect and verify the client's GSTIN before creating the invoice.
Not filing LUT before exporting services. If you export services without a valid LUT and without charging IGST, the export invoice has no valid tax treatment — it is neither covered by LUT (not filed) nor by IGST (not charged). File LUT at the start of each financial year before raising any zero-rated export invoices.
Wrong IGST on imports. Businesses sometimes calculate IGST only on the CIF value without adding BCD. IGST on imports is calculated on the assessable value plus all customs duties — the base is higher than the invoice value.
Frequently asked questions
What is IGST?
IGST stands for Integrated Goods and Services Tax. It is the tax levied by the Central Government on all inter-state supplies of goods or services — transactions where the supplier and the place of supply are in different states or Union Territories. IGST also applies to imports into India and to exports (which are zero-rated). The IGST rate is equal to the combined CGST + SGST rate that would apply to the same supply within a single state. The Centre collects IGST in full and distributes the consuming state's share to that state.
What is the difference between IGST, CGST, and SGST?
CGST and SGST are charged simultaneously on intra-state transactions — supplies where the supplier and buyer are in the same state. CGST goes to the Centre; SGST goes to the supplier's state. IGST is charged instead of CGST + SGST on inter-state transactions — where the supplier and buyer are in different states. IGST is collected by the Centre and then apportioned, with the consuming state's share transferred to that state. On any single invoice, you charge either CGST + SGST or IGST — never all three together.
When should I charge IGST on an invoice?
Charge IGST when the first two digits of your GSTIN and the first two digits of your B2B client's GSTIN are different (different states). For services to unregistered individuals, the place of supply defaults to your state — so charge CGST + SGST unless the service has a specific place of supply rule that makes it inter-state. For exports (goods or services to foreign buyers), charge IGST at 0% (zero-rated) — either under LUT or by paying IGST and claiming refund.
Is IGST the same rate as CGST + SGST combined?
Yes. For any given supply, the IGST rate is exactly equal to the CGST rate plus the SGST rate for that supply. A service taxable at CGST 9% + SGST 9% (total 18%) carries 18% IGST when supplied inter-state. A good taxable at CGST 2.5% + SGST 2.5% (total 5%) carries 5% IGST when supplied inter-state. The tax burden on the buyer is identical whether IGST or CGST+SGST applies — the difference is only in how the tax is collected and distributed.
Can IGST credit be used to pay CGST and SGST?
Yes. IGST credit is the most flexible GST credit — it can be applied first against IGST liability, then against CGST liability, and finally against SGST liability. This cross-head utilisation is one of the key advantages of receiving IGST-bearing invoices. CGST credit, by contrast, can only pay CGST and IGST (not SGST). SGST credit can only pay SGST and IGST (not CGST).
What is IGST on exports?
Exports are zero-rated supplies under the IGST Act, meaning the effective IGST rate on exports is nil. Exporters can either file a Letter of Undertaking (LUT) and export without charging any IGST (then claim ITC refund on inputs), or charge IGST on the export invoice and claim a full IGST refund later. Most exporters and freelancers with foreign clients use the LUT route to avoid cash outflow.
What is IGST on imports?
When goods are imported into India, IGST is charged at the customs port on the assessable value (CIF + Basic Customs Duty + other applicable duties). The IGST paid at customs is claimable as Input Tax Credit by the importer if they are GST-registered and the goods are used for business. This means import IGST is effectively a recoverable cost for GST-registered businesses.
What changed in IGST ITC set-off rules in 2026?
In January 2026, GSTN introduced flexibility allowing taxpayers to use CGST or SGST credit to pay IGST liability in any sequence after exhausting IGST credit. However, in April 2026, the portal reverted to the statutory position under Section 49(5) of the CGST Act: IGST credit must be used first, then CGST credit, then SGST credit when settling IGST liability. The cross-utilisation between CGST and SGST (to pay each other's liabilities) remains permanently prohibited.
Related terms
GST · CGST · SGST · Place of Supply · GSTIN · Input Tax Credit · Tax Invoice · GST Rate · Zero-Rated Supply · LUT · GSTR-3B · E-Invoice
JetInvoice applies IGST or CGST+SGST automatically
Enter your client's GSTIN and JetInvoice instantly detects whether the supply is inter-state or intra-state — and applies the correct tax type without any manual lookup. Karnataka supplier, Delhi client? IGST 18%. Karnataka supplier, Bengaluru client? CGST 9% + SGST 9%. Foreign client under LUT? IGST 0%, zero-rated. Your invoices are always tax-type correct before you send them.