Section 17 of The Integrated Goods and Services Tax Act, 2017
- (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.
- (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.]
- (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 and the 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.
Summary
- Out of the integrated tax paid, the Central Government is apportioned an amount equal to the central tax rate on a similar local supply.
- This applies when the supply is made to an unregistered person, a registered person paying composition tax, or a person who does not or cannot claim input tax credit before the annual return due date.
- The remaining balance of the integrated tax is given to the State where the supply takes place, or to the Central Government if it takes place in a Union territory.
- If the exact place of supply cannot be determined, the balance is shared among all States and Union territories based on the proportion of total supplies made there during the financial year.
- If the business making the supplies cannot be identified, the balance is shared among all States and the Center based on the tax collected in the previous financial year.
- Any interest, penalty, or compounding fees collected on these apportioned taxes are divided in the same manner.
Practical examples
FAQ
1. What happens if a registered business fails to claim its tax credit on time?
If a registered business does not claim its input tax credit before the deadline for filing its annual return, the tax remains in the integrated tax account. The Central Government then splits this money, keeping its own share and transferring the rest to the State where the supply took place.
2. How is the tax split if a business cannot determine the exact place of supply for its transactions?
The balance of the tax is divided among all States and the Central Government (for Union territories) in proportion to the total value of supplies made by that business to each State or Union territory during that financial year.
Test yourself
Q1.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, what portion of the integrated tax paid on an inter-State supply to an unregistered person is first apportioned to the Central Government?
Q2.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, how is the balance of the integrated tax distributed after the Central Government takes its initial share?
Q3.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, how is the balance of the integrated tax apportioned if the place of supply cannot be determined separately?
Q4.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, if the taxable person making the supplies is not identifiable, how is the balance of the integrated tax distributed?
Q5.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, how does the place of supply of goods determined under Section 10 of the Act affect the apportionment of tax?
Q6.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, what happens to any interest, penalty, or compounding amount realized in connection with the integrated tax?
Q7.Under Section 17 of The Integrated Goods and Services Tax Act, 2017, if an apportioned amount of integrated tax is subsequently found to be refundable and is refunded to a person, what is the consequence?