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Section 20 of The Integrated Goods and Services Tax Act, 2017

Subject to the provisions of this Act and the rules made thereunder, the provisions of Central Goods and Services Tax Act relating to, ---

(i)scope of supply;
(ii)composite supply and mixed supply;
(iii)time and value of supply;
(iv)input tax credit;
(v)registration;
(vi)tax invoice, credit and debit notes;
(vii)accounts and records;
(viii)returns, other than late fee;
(ix)payment of tax;
(x)tax deduction at source;
(xi)collection of tax at source;
(xii)assessment;
(xiii)refunds;
(xiv)audit;
(xv)inspection, search, seizure and arrest;
(xvi)demands and recovery;
(xvii)liability to pay in certain cases; (xviii) advance ruling;
(xix)appeals and revision;
(xx)presumption as to documents;

(xxi)offences and penalties;
(xxii)job work; (xxiii) electronic commerce;
(xxiv)transitional provisions; and
(xxv)miscellaneous provisions including the provisions relating to the imposition of interest and penalty, shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act: Provided that in the case of tax deducted at source, the deductor shall deduct tax at the rate of two per cent. from the payment made or credited to the supplier: Provided further that in the case of tax collected at source, the operator shall collect tax at such rate not exceeding two per cent, as may be notified on the recommendations of the Council, of the net value of taxable supplies: Provided also that for the purposes of this Act, the value of a supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier: Provided also that in cases where the penalty is leviable under the Central Goods and Services Tax Act and the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, the penalty leviable under this Act shall be the sum total of the said penalties. 1[Provided also that a maximum amount of forty crore rupees shall be payable for each appeal to be filed before the Appellate Authority or the Appellate Tribunal.]

Summary

Most administrative rules from the Central Goods and Services Tax Act apply to integrated tax in the exact same way, including rules on tax credit, registration, tax bills, accounts, audits, and appeals.
For tax deducted at source (TDS), the person making the payment must deduct tax at a rate of two percent from the payment made or credited to the supplier.
For tax collected at source (TCS), e-commerce platforms must collect tax at a rate not exceeding two percent, as recommended by the Council.
The value of a supply for calculating tax includes all other taxes, duties, and fees charged separately, except for the integrated tax itself and the State compensation cess.
If a penalty is applicable under both central and State/Union territory tax laws, the penalty under this Act will be the sum total of those two penalties combined.
The maximum fee or amount payable for filing any single appeal before the Appellate Authority or the Appellate Tribunal is capped at forty crore rupees.

Practical examples

1SmartTech Solutions, an e-commerce platform in Delhi, facilitates an inter-State sale of electronics. Under Section 20, they must collect tax at source from the supplier. The rate is set at one percent of the net value of the sale, which is within the legal limit of two percent.

2A government department in Mumbai pays a supplier 500,000 rupees for an inter-State service. Under Section 20, the department must deduct tax at source (TDS) at the flat rate of two percent, which equals 10,000 rupees, and pay it to the government.

FAQ

1. What is the rate of tax deducted at source (TDS) under Section 20?

The rate of tax deducted at source for integrated tax is fixed at exactly two percent of the payment made or credited to the supplier.

2. What is the maximum limit on the rate of tax collected at source (TCS) by e-commerce operators?

E-commerce operators must collect tax at a rate not exceeding two percent of the net value of taxable supplies.

3. How are penalties calculated if a violation occurs under both central and State tax laws?

If a penalty is leviable under both the central and State or Union territory tax acts, the penalty under the Integrated Goods and Services Tax Act will be the sum total of those two penalties added together.

Test yourself

Q1.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, what is the fixed rate for tax deducted at source (TDS) from a payment made to a supplier?

Q2.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, what is the maximum rate at which an e-commerce operator can collect tax at source (TCS)?

Q3.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, what taxes or cesses must be excluded when determining the value of a supply if they are charged separately?

Q4.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, what is the maximum amount payable for each appeal filed before the Appellate Authority or Appellate Tribunal?

Q5.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, how is the penalty determined if a penalty is leviable under both the Central Goods and Services Tax Act and the State Goods and Services Tax Act?

Q6.Under Section 20 of The Integrated Goods and Services Tax Act, 2017, which of the following areas of the Central Goods and Services Tax Act is explicitly excluded from applying to the integrated tax?

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