Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
Interstate supply involves the movement of goods or services across state/UT borders and attracts IGST, while intrastate supply occurs within the same state/UT and attracts CGST and SGST/UTGST.
IGST revenue is shared between the central and destination states, whereas CGST goes to the central government and SGST to the state government.
Businesses engaged in interstate supply must register for GST regardless of turnover, while intrastate supply mandates registration only after crossing the turnover threshold.
Input Tax Credit (ITC) for IGST can be used to offset IGST, CGST, or SGST liabilities, while CGST and SGST credits can only be used against their respective taxes.
Supplies to or from Special Economic Zones (SEZs) are always treated as interstate supplies, regardless of location.
The Goods and Services Tax (GST) was implemented in India on July 1st, 2017. The GST regime has two core elements, namely, interstate and intrastate GST, that play a crucial role in identifying the corresponding types of GST- CGST, IGST or SGST.
Whether a transaction is an interstate or an intrastate, one depends upon whether the supplier's location is outside or inside the state and at which place the supply actually takes place.
This blog breaks down the difference between interstate and intra-state supply in GST and other crucial details related to it to avoid any business compliance issues.
What Is Interstate Supply?
Inter-state transactions are domestic supplies wherein goods or services are transferred from one state to another state or from a state to a Union Territory. Additionally, it encompasses imports and exports to interstate trade involving the Special Economic Zone (SEZ) and Export-Oriented Units (EOU). On these, Integrated Goods and Services Taxes are levied by the Central Government so that the tax structure stays the same between states and territories.
Inter-state supplies levy IGST (Integrated Goods and Services Tax) whenever goods or services cross state boundaries. The amount of the tax collected during inter-state transactions, according to a fixed formula, would then be distributed between the destination and central states. That saves business owners from facing multiple indirect taxes, and at the same time provides a reasonable option to the central state government in sharing tax revenues with the state governments.
What Is Intrastatе Supply?
The intra-statе supply refers to transactions where both the supplier and the place of supply are within the same state. In the cases of intra-state supply, CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) or UTGST (Union Territory Goods and Services Tax) are charged, with the central and state or union territory governments imposing the respective taxes.
Implementation of CGST and SGST reconciled the previous varying central taxes and state-level VAT (Value Added Tax), thus lowering the complex structure of tax and compliance burden. The rate of GST for intra-state supply varies based on the type of goods or services. Vendors are responsible for collecting both CGST and SGST/UTGST from customers for vendor payments.
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Difference Between GST Interstate & GST Intrastate
The following table provides the key difference between GST interstate and GST intrastate:
Parameters
GST Interstate
GST Intrastate
Tax Applicability
The inter-state GST supply applies to the transaction of goods or services across different states or Union Territories
GST intrastate supply applies to the transaction of goods or services within the same state or Union Territories
GST Registration
Businesses must register for GST regardless of their turnover.
GST registration is required only if a business exceeds the specified turnover limit and is specific to the state of operation.
GSTIN
It is allotted for interstate operations
It is fixed in the state where you operate your business.
Tax Liability
The recipient is responsible for paying IGST.
The recipient must pay both SGST and CGST.
Place of Supply Rules
Special rules apply for the correct determination of the place of supply for interstate transactions.
Separate rules exist for accurate determination of the place of supply within the same state.
Input Tax Credit
The IGST paid on inputs can be utilised to reduce liabilities for IGST, CGST, or SGST
Businesses can claim input tax credits for CGST against CGST and for SGST against SGST
Interstate and Intrastate GST Rates With Examples
GST interstate and intrastate supply in India vary based on the type of goods or services provided. The applicable rates are categorised into four GST slabs: 5%, 12%, 18% and 28%. In addition to this, there are some high-value products that have a specific GST rate applicable and some basic products that are in the nil rate category. Let us proceed with examples of how GST is calculated for transactions both interstate as well as intrastate transactions.
Interstate GST Rate Example
Suppose XYZ Pvt. Ltd. in Bengaluru, Karnataka, sold a laptop worth ₹1,50,000 to someone in Chennai, Tamil Nadu. This is an interstate supply as the supply is crossing the border of the state. Slab-wise applicable GST rate for a laptop is 18%. In this case, IGST is being levied by the Central Government, which is being passed on to the destination state.
IGST Calculation: 1,50,000 X 18% = ₹27,000
The dealer will add IGST (Integrated GST) of ₹27,000, which the Centre receives, divided according to a fixed ratio between the Centre and the state in which it is received, that is Tamil Nadu in this case.
As an exception, if the supply is made from Bengaluru, Karnataka to a unit located within Special Economic Zones Karnataka would still be construed as an interstate supply. Invariably, all supplies made to or from Special Economic Zones units are treated as interstate supplies.
Intrastate GST Rate Example
Suppose ABC Private Limited, based in Ahmedabad, Gujarat, supplies televisions worth ₹2,50,000 to a buyer located in Rajkot, Gujarat. The applicable current rate of GST return is 18%, which is split between 9% CGST and 9% SGST.
CGST/SGST Calculation: ₹2,50,000 x 18% = ₹45,000
₹22,500 is collected as CGST as well as SGST in the present case.
The total amount collected by the dealer is ₹45,000. The CGST would go to the Central Government and the SGST would be paid to the Gujarat Government ₹22,500 each.
The levy of both intra-state GST rates are by the Central and State Governments. The combined rate of both CGST and SGST is, however, equal to the rate of IGST. In essence, the overall tax burden in an interstate supply will be no different from the overall burden in an intrastate supply. It is just that the tax is being applied differently in one case in relation to the other.
Conclusion
The difference between interstate and intrastate supply in GST lies in how taxes are applied based on the supply location of the seller and buyer. While the overall applicable tax rate remains the same, the basic difference lies with IGST revenue shared between the centre and states, and CGST/SGST split between the central and state governments. Understanding these critical distinctions helps in managing tax liabilities and maintaining the aspects of business compliance requirements more efficiently.
FAQs
What is IGST with an example?
IGST (Integrated Goods and Services Tax) is applied on the supply of goods and services during interstate transactions or imports/exports under GST. For example, if a dealer in Maharashtra sells goods worth ₹1,00,000 to a buyer in Delhi, IGST at the applicable rate (e.g., 18%) will be charged. The IGST amount of ₹18,000 will be collected by the central government and later distributed to the destination state (Delhi).
How is interstate GST calculated?
Interstate GST is calculated by applying the applicable IGST rate to the taxable value of goods or services. For example, if the value of goods supplied from Karnataka to Tamil Nadu is ₹2,00,000 and the GST rate is 18%, the IGST will be: IGST = ₹2,00,000 x 18% = ₹36,000. This tax is collected by the central government and shared with the destination state.
Can IGST be paid through SGST?
No, IGST cannot be paid directly using SGST credit. The order of tax credit utilization is as follows: IGST credit must first be used to pay IGST liability. Remaining IGST credit can be used for CGST and SGST liabilities. However, SGST credit can only be used to pay SGST and not IGST.
What are the examples of types of GST?
The four types of GST are:
IGST (Integrated GST): Applied on interstate supplies and exports/imports. CGST (Central GST): Applied within a state and collected by the central government. SGST (State GST): Applied within a state and collected by the state government. UTGST (Union Territory GST): Applied in Union Territories in place of SGST.
For example, IGST applies when goods move from Delhi to Gujarat, while CGST and SGST apply to transactions within Delhi.
What if IGST is paid instead of CGST and SGST?
If IGST is paid instead of CGST and SGST due to an error, the taxpayer must correct it by paying the correct tax (CGST and SGST). The excess IGST paid can then be claimed as a refund or adjusted against future liabilities. This ensures compliance with GST rules and avoids penalties.
What is the 180 days rule for GST?
The 180 days rule in GST mandates that if a buyer fails to pay the supplier within 180 days of the invoice date, the Input Tax Credit (ITC) availed on that transaction will be reversed. The buyer can reclaim the ITC once the payment is made to the supplier, ensuring that the transaction remains valid under GST rules.
What is the rate of IGST?
The IGST rate depends on the type of goods or services and falls under one of the four slabs: 5%, 12%, 18%, or 28%. For example, essential goods like food grains attract 5%, while luxury items like cars attract 28%. The rate structure ensures uniformity across interstate supplies.
Sandipan Mitra is the CEO and co-founder of Pice. He boasts eight years of experience in the B2B and fintech sector. Sandipan's journey includes significant roles at multiple Indian Unicorns Including Product at PayU, and as founding member / VP, Product at Open Financial Technologies.
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