Section 5 of The Integrated Goods and Services Tax Act, 2017
- (1)Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption 1[and un-denatured extra neutral alcohol or rectified spirit used for manufacture of alcoholic liquor, for human consumption], on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person: Provided that the integrated tax on goods 2[other than the goods as may be notified by the Government on the recommendations of the Council] imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962).
- (2)The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
- (3)The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. 3[(4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.]
- (5)The Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
Summary
- Integrated Goods and Services Tax is levied on all interstate supplies of goods or services or both, except on alcoholic liquor for human consumption, undenatured extra neutral alcohol, and rectified spirit used for human consumption.
- The tax rate is notified by the government on the recommendations of the Council, and it cannot exceed forty percent.
- Imported goods are taxed in accordance with the Customs Tariff Act, 1975, at the point when customs duties are levied under the Customs Act, 1962.
- Five specific petroleum products (crude, high speed diesel, petrol, natural gas, aviation turbine fuel) are temporarily exempt and will be taxed only from a date notified in the future.
- The government can notify categories of supplies where the tax must be paid by the buyer (reverse charge basis) instead of the seller, including when a registered person buys from an unregistered supplier.
- For services supplied through electronic commerce operators, the operator is liable to pay the tax, and if they have no physical presence in India, they must have a representative or appoint a person to pay the tax.
Practical examples
FAQ
1. What is the maximum tax rate that can be levied under this section?
The integrated tax rate cannot exceed forty percent, as notified by the Government on the recommendations of the Council.
2. Is tax levied on alcohol under this section?
No, alcoholic liquor for human consumption, and undenatured extra neutral alcohol or rectified spirit used to manufacture such alcoholic liquor, are completely excluded from the levy.
3. What are the five petroleum products on which tax is not currently levied?
They are petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, and aviation turbine fuel.
4. What is reverse charge under this section?
Reverse charge means that the tax is paid by the person receiving the goods or services (the recipient) rather than the person supplying them.
5. What happens if an electronic commerce operator has no physical presence or representative in India?
The electronic commerce operator must appoint a person in the taxable territory of India for the purpose of paying the tax, and that person will be liable for the tax.
Test yourself
Q1.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, what is the statutory ceiling on the tax rate that the Government can notify?
Q2.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, which of the following items is completely excluded from the levy of integrated tax from day one?
Q3.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, how does a determination of the place of supply of services under Section 12 affect the tax levy?
Q4.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, who is responsible for exercising the powers of collecting and administering the tax levied on interstate supplies?
Q5.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, what happens to the integrated tax paid on goods that are subsequently refunded to a tourist under Section 15?
Q6.Under Section 5 of The Integrated Goods and Services Tax Act, 2017, if an electronic commerce operator has no physical presence or representative in the taxable territory of India, how must they comply with their tax liability?