GST On Interstate Vs. Intrastate Supply

Due to several legal formalities taxation systems are quite complex in India. Hence, the Indian government introduced the Goods and Services Tax (GST). This is a significant initiative for the economic reform of the nation made by the India Government. Based on the needs of the market "One Nation, One Tax", as it streamlines all the previous taxes into one leading to a uniform taxation system’s aims at easing the process of carrying out a business in the country, forming a common market. Whether one supply goods and services within the city or across the borders, the supplier or the buyer has to pay the GST Interstate or Intrastate.

What is Interstate Supply?

The supply of goods or services from one state to another would be called interstate supply according to GST. While the GST Act defines interstate supply as when the location of the supplier and the place of supply for the customer are in:

• Two different States
• Two different Union territories
• State and a Union territory.

What is Intrastate Supply?

The supply of goods or services within the same state or Union territory is called an intrastate supply according to GST rules. However, the supply of goods or services to a Special Economic Zone developer or Special Economic Zone unit situated within the same state would not be considered Intrastate.

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 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. So, SGST and CGST will not be charged in this case.
• The IGST rate will be equal to the SGST plus CGST rate.
• The Interstate supply called as IGST is 18% (i.e., 9% + 9%).

How can we help you?

Online Legal India™ is committed to helping entrepreneurs and small business owners start, manage and grow their business with peace of mind at an affordable price. However, we also aim to educate the entrepreneur on the legal and regulatory requirements, offering support to the company at every stage to make sure they file GST continually and are compliant.