IGST model preserves cross border input tax credit chains and coordinates central clearing for inter state tax transfers.

Inter-state supplies are taxed under the IGST model, where the Centre levies an integrated tax equal to combined central and state components. The inter-state seller pays tax on value addition after adjusting credits of IGST, CGST and SGST. Exporting States transfer SGST credits used for IGST payment to the Centre; the Centre transfers IGST credits used for SGST payment to the importing State. A central electronic clearing mechanism verifies claims and coordinates transfers.

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