All about Intrastate and Interstate Supply under GST

Ashish M. Shaji

16 Mar, 2023

The taxation system may be quite complex for some to understand due to the numerous legal formalities that accompany it. After the introduction of GST, there are various factors that need to be understood. One of them includes intrastate and interstate supply under GST. Whether the supply of goods and services is made within the city or across the borders, the supplier or the buyer must pay the GST interstate or intrastate.

Meaning of Intrastate and Interstate Supply under GST

GST is a levy on the supply of goods and services. In order to levy GST, supplies are classified into two categories which include interstate supplies that mean supplies from one state to another and intrastate supplies that means supplies within the state.

When we speak about interstate supplies, the central government shall charge integrated tax under GST Act 2017, whereas in case of intrastate supplies, the central government will charge central tax under CGST Act 2017^[1] and state tax under the SGST Act 2017.

Main features of the Interstate Supply

There are certain prominent features of the interstate supply under GST that is mentioned below:

• Under GST, interstate supply relates to the procurement of goods or services from one state to another;
• The GST Act mentions domestic supply as when the suppliers’ position and the place of supply are-
• Two distinctive states;
• Two regions under one Union Territory; or
• State and a UT.
• Moreover, the supply of goods imported into India is called the interstate supply before reaching the customs station;
• Additionally, supplies of goods or services are called interstate supplies from or to a particular development zone or an exclusive economic zone;
• For instance- In case you have a company named ABC in the state of Karnataka, and you supply products to another Company called XYZ in the state of Madhya Pradesh, it falls under the category of interstate supply;
• This means that the trade would be interstate supply if the suppliers’ position and the delivery place are in separate states.

Main features of the Intrastate Supply

The main features of the intrastate supply under GST are mentioned below:

• Under GST, intrastate supply happens when the distribution of goods and services takes place within the same state or same territory of the country;
• The distribution of goods and services is called intrastate when the providers’ position and the place, that is, the buyer’s location, are the same;
•  A seller should obtain CGST and SGST from the buyer in case of intrastate transactions;
• The CGST is deposited to the Central government, and SGST is filed with the State Government;
• For instance- In case a company supplies to Mysore (Karnataka State) goods from the factory in Bangalore (Karnataka State), both sides are from Karnataka means that it is an intrastate supply;
•  It denotes that if the suppliers’ position and the place of delivery is within the same state, the supply will be called an intrastate supply.

Tax implication on the interstate and intrastate supply

It is worth mentioning here that the Goods and Services Tax has replaced taxes like:

• Central Excise Duty;
• Additional duties of customs;
• Special additional duty of customs;
• Service tax;
• State VAT;
• Central sales tax;
• Entertainment and amusement tax;
• Taxes on betting, gambling etc.;
• Luxury tax.

Here the first four taxes were previously levied by the Centre, and others were levied and collected by the state.

According to the current GST law, taxes are levied on goods and services based on the place of supply. In case the transactions fall under Intrastate supply of goods or services, central GST or CGST is levied by the Centre, and SGST or State GST is levied by the state where supply has taken place.

In case of interstate supply of goods and services, IGST or integrated GST is collected by centre. In this scenario, no CGST or SGST is charged. The rate of IGST shall be equal to the rate of CGST plus SGST.

Conclusion

To understand the dynamics of IGST, CGST, SGST, we need to understand the meaning of intrastate and interstate supply under GST. As a business professional, one should be aware of these significant factors relating to the GST.

Read our article: Difference between GST Interstate and Intrastate Supply