APPORTIONMENT OF TAX AND SETTLEMENT OF FUNDS [CHAPTER VIII OF THE IGST ACT, 2017] - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

32. APPORTIONMENT OF TAX AND SETTLEMENT OF FUNDS [CHAPTER VIII OF THE IGST ACT, 2017] 32.1. Since Central Tax (CGST) and State Tax (SGST) are separate taxes levied concurrently on a transaction, the same are identifiable and can be transferred to the CGST account and SGST account of the concerned State Governments, respectively. However, this is not possible in case of Integrated tax (IGST). Therefore, it becomes necessary to apportion IGST into components that can be transferred to CGST account and SGST account of the State Governments concerned. 32.2. Section 17 of the IGST Act, 2017 prescribes the provisions for such apportionment of IGST and settlement of funds between the Central Government and the State Governments. 32.3. Section 17(1) of IGST Act, 2017 lays down that in respect of the IGST paid on the following supplies of goods and/or services, the IGST shall be apportioned: inter-State supply to an unregistered person or to a registered person paying tax under composition scheme; inter-State supply where the registered person is not eligible for input tax credit; inter-State supply 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 the tax 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; import by an unregistered person or by a registered person paying tax under composition scheme; import where the registered person is not eligible for input tax credit; import made in a financial year by a registered person, where he does not avail of the said credit within the specified period and thus the tax 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. 32.4. The IGST paid on the supplies mentioned above shall be apportioned as under: The amount of tax calculated at the rate equivalent to the CGST on similar intra-State supply shall be apportioned to the Central Government. The balance amount of IGST remaining in the integrated tax account shall be apportioned to the State where such supply takes place and to the Central Government if such supply takes place in a Union territory. If the place of such supply made by any taxable person cannot be determined separately, the balance amount shall be apportioned to each of the States/Central Government (in relation to Union territories) in proportion to the total supplies made by such taxable person to each of such States/Union territories in a financial year. If 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 SGST/UTGST by the respective State/ the Central Government during the immediately preceding financial year. 32.5. In terms of Section 17(3) of the IGST Act, 2017, the interest, penalty and compounding amount realised in connection with the IGST shall also be apportioned in the similar manner. 32.6. Section 17(4) of the CGST Act, 2017, provides that the Central Government shall transfer the amount apportioned to it to the CGST account or UTGST account, as the case may be, and the amount apportioned to the State Government(s) to the SGST account of the respective States. 32.7. As per Section 17(2A) of the IGST Act, 2017, the amount of IGST in respect of B2B supplies wherein ITC is taken by the recipients may, for the time being, on the recommendations of the GST Council, be apportioned at the rate of 50% to the Central Government and 50% to the State Governments/Union territories on ad hoc basis. Such amount shall be adjusted against the amount apportioned under Sub-sections (2) and (3). IGST apportioned to a State/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/ Central Government on account of such Union territory. 32.8. Section 18 of the IGST Act, 2017 provides as under: When IGST credit is utilised for payment of CGST, the amount collected as IGST shall stand reduced by the amount equal to such credit. The Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the CGST account. When IGST credit is utilised for payment of UTGST, the amount collected as IGST shall stand reduced by the amount equal to such credit. The Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the UTGST account. When IGST credit is utilised for payment of SGST, the amount collected as IGST shall stand reduced by the amount equal to such credit and shall be apportioned to the appropriate State Government. The Central Government shall transfer the amount so apportioned to the account of the appropriate State Government. Appropriate State means the State or Union territory where a taxable person is registered or is liable to be registered under CGST Act, 2017. 32.9. Section 19 of the IGST Act, 2017, provides that a registered person who has paid IGST on a supply considered by him to be an inter-State supply, but which is subsequently held to be an intra-State supply, shall be granted refund of the amount of IGST so paid. A registered person who has paid CGST and SGST/UTGST on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any interest on the amount of IGST payable.