GST

Difference between GST Interstate and Intrastate Supply

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.

What is GST Interstate supply?

As per section 7 of the IGST (Integrated Goods and Services Tax) Act^[1], 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:

• In two different States; or
• In two different Union Territories (UTs); or
• In a State or a Union Territory (UT).

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.

For example,

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.

What is GST Intrastate supply?

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.

For example,

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.

What is the difference between GST interstate & 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 GST interstate attracts IGST (Integrated Goods and Services Tax).
• For the GST intrastate, the tax amount will be split equally into the CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax).
• The GST rate for the intrastate supply of goods and services will remain the same.

The compliance according to the existing GST law, the taxes imposed on various goods and services depends upon the supply location.

• If the supply location is within the state, then the GST intrastate will apply, attracting CGST and SGST.
  • The center of commerce will collect the CGST;
  • The SGST is received by the state where the supply occurs.
• If the supply is between two states or two union territories or a state & a union territory, the centre will collect IGST. The IGST rate will be equal to the sum of CGST and SGST rate.

Example

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.

Conclusion

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?