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The government introduced GST to bring a revolution in India’s taxation system, and it is an initiative taken for the economic reform in India. GST aims to ease the process of filing indirect taxes in the country. Whether the supply of goods or services within the state or outside the supplier/buyer has to pay GST interstate or intrastate?
This article will look into the definition and difference between them.
As per section 7 of the IGST (Integrated Goods and Services Tax) Act, GST interstate supply means the supply of goods and services from one state to another.
Interstate supply is defined in the GST Act as to when the location of the supplier and place of supply is:
The interstate supply will be named the procurement of goods or services from one ate to another.
The supply of goods imported in India, even before they reach the customs station, is also an interstate supply, and the supplier/buyer must pay GST interstate.
The supply of goods and services to or by an SEZ (Special Economic Zone) unit or SEZ developer is also interstate supply.
There are two companies, ABC of Bangalore and XYZ of Maharashtra, and the former is the supplier and supplies goods to XYZ in Maharashtra. It comes under the category of interstate supply and is liable for GST interstate.
As per section 8 of the IGST (Integrated Goods and Services Tax) Act, GST intrastate supply means the supply of goods and services within the same State or UT (Union Territory). In other words, if the supplier’s location and the buyer’s location are within the same state or Union Territory, it is an intrastate supply, and GST for intrastate is applicable here.
The seller in the intrastate supply must obtain CGST and SGST from the buyer in all the intrastate transactions.
Nonetheless, the supply to or by SEZ (Special Economic Zone) or SEZ developer not to be termed as intrastate supply, but intrastate supply.
There are two companies, ABC of Bangalore and XYZ of Mysore. ABC is the supplier and supplies goods to XYZ. Since both the companies are located within one state, i.e., Karnataka, it comes under the category of intrastate supply and is liable for GST intrastate.
GST interstate and GST intrastate have a significant impact in determining IGST, CGST, and SGST. Wherein the former attracts the IGST, and the latter attracts CGST & SGST.
The significant differences between GST interstate and GST intrastate are:
The compliance according to the existing GST law, the taxes imposed on various goods and services depends upon the supply location.
An electronic store based out of Chennai, Tamil Nadu, sells an AC of Rs. 1, 20,000 to a store in Mumbai, Maharashtra; then they have to pay GST interstate of Rs. 21, 600 as IGST.
If the same store sells AC to a store in Madurai, then they have to pay Rs. 10,800 CGST and Rs. 10,800 as SGST, though the total amount payable remains the same.
This is an example of GST interstate, and GST intrastate, and amount levied.
GST interstate and GST intrastate concepts are important to determine the applicability of IGST, SGST, and CGST. It is important to know the supplier’s location and the buyer’s location to determine whether the GST rate applicable is interstate or intrastate.
Read our article:What are the exemptions under GST?