September 21, 2023

GST on Interstate vs. Intrastate Supply

Introduction to GST:

GST is an indirect tax that is imposed on the supply of goods or services or both. To gather GST, supplies are classified as Inter-State supplies, which mean goods exporting from one State to another, and intra-State supplies which means products in the State.The Central Government charges the improved tax by the GST Act of 2017 in the inter-state supplies, while the Central Government applies the fee following the GST Act 2017 in the case of intra-State supplies and the state tax comes under the SGST law of 2017.

Inter-State Supply

Under GST, inter-state supply is defined as the procurement of goods or services from one state to another. The GST Act denotes domestic supply as when the place of supply and the supplier ‘s position are: Two distinctive states; Two regions under a single Union Territory; or State and a Union territory.

However, the supply of goods coming into India is often known as an inter-state supply before they reach the customs destination. For example, if you have a company XYZ in the State of Maharashtra and you supply products to Company ABC in Karnataka, then it comes under the category of inter-state supply. It makes sure that the trade would become an inter-state supply if the delivery place and supplier‘s position are in separate countries.

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Intra State supply

Under GST, intra-state supply happens when the distribution of goods and services occurs within the same state or territory of the Country. The distribution of goods or services intra-State is when the provider ‘s place and position are the same. A seller must get both SGST and CGST from the buyer in the intra-State transactions. The CGST is submitted to the Government of the Central, and SGST is deposited with the State Government. For example – when a company has supplied to Pune goods from the Mumbai factory, both sides in Maharashtra are considered an intrastate supply. This means that, if the delivery place and the supplier ‘s position is within the same State, supply is an intra-State supply.

GST on Interstate vs. Intrastate Supply

  • Interstate supply under GST induces an Integrated Goods and Services Tax i.e IGST. 
  • Both the State Goods and Services Tax (SGST) and the CBT apply on an intra-state supply.
  • For intrastate supply, the GST rate remains the same for the goods or services.
  • The tax rate and GST shall, however, be split into two parts equally: SGST and CGST.
  • In addition to existing GST law, taxes are levied on different goods or services according to the supply location.
  • If the transaction embodies an intra-state supply of goods and services, CGST is collected by the Center of Commerce, and SGST is collected by the State where the supply occurs.
  • In the case of the interstate supply of goods and services, the Centre gathers IGST. SGST and CGST will not be charged in this case.
  • The IGST rate will be equal to the SGST plus CGST rate.
  • For example; When charges on a particular are 9%, the inter-state supply should be charged at @ 9% CGST and at 9% SGST. 
  • The Interstate supply called as IGST is 18% (i.e., 9% + 9%).
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