The classification of a supply as either Intra-State GST or Inter-State Supply hinges on the respective locations of the supplier and the recipient. To ascertain the applicable tax regime, it is crucial to determine the nature of the supply. This determination guides whether integrated tax or a combination of Central and State taxes should be remitted. An “Inter-State Supply of Products” pertains to providing goods where the supplier and the recipient are situated in different states or union territories.
In contrast, an Intra-State delivery of products refers to the transportation of goods to a destination within the same state or union territory as the supplier. This article will provide information on topics such as interstate and intrastate meaning and a comparison of Intra-State versus Inter-State transactions.
Interstate Meaning in GST
Inter-state meaning in GST refers to situations where the provider of goods or services is situated in a state or Union Territory distinct from the supply location. This classification encompasses supplies related to import, export, or transactions involving Special Economic Zones (SEZ) units or Export-oriented Units (EOU), also regarded as interstate supplies. The Central Government imposes the Integrated Goods and Services Tax (IGST) on interstate supplies of goods and services within India. Businesses need to understand the inter state meaning in gst to determine when IGST is applicable versus CGST/SGST.
Interstate means in GST that when goods and services are dispatched from one state to another, the central government imposes IGST, which is subsequently apportioned to the receiving state. The revenue generated through IGST is divided between the central and state governments as per a predetermined allocation formula. This system ensures equitable tax revenue sharing between the central and state governments, eliminating the need for businesses operating in different states to contend with multiple tax liabilities.
Interstate Supply Applicability
- Inter-state applies to domestic supplies, which means when the supplier’s location and the place of supply fall into one of the following categories:
- Two distinct states,
- Two separate regions within a single Union Territory, or
- A state and a Union Territory.
- Between intra state vs inter state, inter-state supply encompasses goods and/or services imported into India.
- Inter-State supply also covers goods and/or services provided from a Special Economic Zone (SEZ) or an Export-oriented Unit (EOU). The inter state meaning in GST plays a key role in classifying a supply as intrastate or interstate for tax purposes under GST.
Intrastate Meaning in GST
Intrastate meaning in GST supply pertains to situations in which both the supplier of goods or services and the place of supply are located within the confines of the same state. Intrastate supplies incur liabilities for CGST (Central Goods and Services Tax) and SGST/UTGST (State Goods and Services Tax/Union Territory Goods and Services Tax). These taxes are imposed by the respective Central and State/Union Territory governments.
Intra-state GST rates vary according to the specific nature of the goods or services being provided. In intrastate transactions, vendors are required to collect both CGST and SGST from their customers.
Intra-State Supply Applicability
Intra-State supply is applicable when the goods and/or services are provided within the same:
- State
- Union Territory
What is the Difference Between Interstate Supply and Intrastate Supply?
Under the GST system, interstate supply is subject to the Integrated Goods and Services Tax (IGST). Between interstate vs intrastate, intrastate supply incurs both the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST). In the context of intrastate supply, the GST rate for goods or services remains consistent. However, the GST rate and the corresponding tax amount are evenly divided into two components, namely SGST and CGST.
For instance, if an electronics store in Maharashtra sells a laptop worth Rs. 1,00,000 to a customer in Karnataka, and the applicable GST rate is 18%, the invoice for the sale will include Rs. 18,000 in addition to the total product value. Conversely, if the same electronics store sells the laptop to a customer within Maharashtra, the invoice will display CGST of Rs. 9,000 and SGST of Rs. 9,000 alongside the total product value.
The following table presents a structured overview of the key distinctions between intra state and inter state meaning in GST in India:
| Parameters | Interstate Supplies | Intrastate Supplies |
| Applicable on | The provision of goods and services across distinct states and Union Territories. | The provision of goods and services inside a single state or Union Territory. |
| Levied by | Central Government | The Central Government imposes CGST, while the state or Union Territory government levies SGST/UTGST. |
| Tax rate | The IGST rate is applied according to the prevailing rates for specific goods or services. | Both CGST and SGST rates are independently and uniformly applied as per the current rate applicable to the particular goods or services. |
| Destination state | Receives a portion of the IGST revenue collected. | Receives the entire sum of SGST funds collected. |
| Place of supply | A state or location different from the supplier’s place of business. | The supplier’s location is in the same state. |
| Input Tax Credit | The input tax credit for IGST can be utilized to offset the IGST liability first and, subsequently, the CGST or SGST liabilities in any sequence. | After the IGST credit has been entirely utilized, the CGST credit can be applied to offset CGST liabilities and the SGST credit to offset SGST liabilities, as well as to offset IGST liabilities. However, it’s important to note that cross-utilization between CGST and SGST credits is not permitted. |
Conclusion
Intrastate GST is imposed on the supply of goods and services taking place within a single state or union territory. In contrast, interstate GST applies to transactions involving goods and services crossing state boundaries. The Goods and Services Tax (GST) represents India’s most advantageous tax reform in terms of both short-term and long-term benefits and drawbacks.
To grasp the fundamental meaning and distinction between intrastate and interstate supply under GST, it is essential to first understand the definitions and key differences between IGST, CGST, and SGST/UTGST. Additionally, business owners need to be well-informed about the factors that influence the provision of products or services under the GST regime.
GST is one of India’s most successful tax reforms, offering various advantages in the short and long run. If you encounter difficulties calculating the GST amount, you can utilize a GST calculator based on tax rates and supply conditions. In essence, intrastate supply refers to the scenario where goods and services are provided within the boundaries of a single state.
FAQs
Q1. What is the difference between interstate and intrastate supply?
Interstate supply refers to movement of goods or services from one state to another. Intrastate supply means supply within the same state.
Q2. Is GST rate different for interstate and intrastate supply?
Yes, IGST (Integrated GST) applies on interstate supply while CGST and SGST apply on intrastate supply.
Q3. Do I need separate registration for interstate supply?
No, a single registration allows you to do both intrastate and interstate supply.
Q4. Should I issue separate invoices for interstate supply?
Yes, invoice for interstate supply should clearly mention ‘Supply meant for interstate trade or commerce’.
Q5. How is tax collected on interstate supply?
IGST or Integrated GST is levied on interstate supply. It is collected by the Centre.
Q6. How is tax collected on intrastate supply?
CGST and SGST are applicable on intrastate supply and collected by Centre and State respectively.
Q7. Which supply requires e-way bill – interstate or intrastate?
E-way bill is required for transporting goods for both interstate and intrastate supply if above exemption limit.
Q8. How will I determine if a supply is intrastate or interstate?
It depends on where movement of goods originates and terminates. Between two states – it is interstate.