Introduction of  IGST Act :

One of the distinctive features of Goods and Services Tax is that it is levied on the value addition on each stage of supply chain. This is achieved by allowing input tax credit (ITC) of tax incidence on the immediately preceding stage of supply chain. Illustratively, the tax paid by manufacturer supplier is available as ITC to whole seller. The tax paid by the whole seller is available as ITC to retailer. Thus it is essential to maintain integrity of ITC chain in GST regime.

In the case of interstate supplies, the supplier and recipient are located in different states. In the present scheme of taxation, Central Sales Tax (CST) is levied on inter-state sale of goods which is an origin-based tax accruing to the exporting State. GST will be a destination based tax levied on both intra-state and inter-state supply of goods or services. For inter-state supplies, although the tax would be paid in exporting State, the same has to reach the importing State. It may not be feasible to do so by levying SGST in the exporting state. The Integrated GST (IGST) model is essentially evolved to ensure availability of the input tax credit of tax paid by the taxpayer in exporting State, on interstate supply, to the taxpayer in the importing State.