GST on Inter-State and Intra-State Supplies

The Goods and Services Tax (GST) revolutionized India’s indirect tax landscape by replacing a myriad of central and state taxes with a unified tax system. However, within GST, the distinction between inter-state and intra-state supplies plays a pivotal role in determining the type of tax to be levied—IGST, CGST, and SGST. For businesses, understanding this difference is crucial for accurate invoicing, return filing, and compliance.

In this blog, we’ll explain the difference between inter-state and intra-state supplies, GST rates applicable in each case, input tax credit (ITC) treatment, and key compliance requirements under the GST regime.

What is Interstate Supply under GST?

Under GST, "interstate supply" refers to the transfer of goods or services between states or union territories. Simply put, if the supplier and the buyer are located in two different states, union territories, or one in a state and the other in a union territory, the transaction is considered an interstate supply.

Here are some examples of interstate supply:

• When a seller in Maharashtra supplies goods to a buyer in Gujarat.
• When a supplier in Delhi provides services to a customer in Chandigarh.

Apart from this, the following are also treated as interstate supply:

• Import of goods into India until they clear the customs station.
• Any supply given to or by a developer or Special Economic Zone (SEZ) unit.

Such transactions are subject to Integrated Goods and Services Tax (IGST), which is collected by the central government and later shared between the center and the respective state.

What is Intrastate Supply under GST?

Intrastate supply under GST means when the supplier and the buyer are located in the same state or the same Union Territory. In such cases, the transaction is treated as an intrastate supply of goods or services.

An intrastate supply occurs, for instance, when a store in Kolkata sells goods to a client in Durgapur, both of which are in West Bengal.

In these cases, two types of GST are applied:

• Central Goods And Services Tax (CGST)
• State GST or Union Territory GST, which depends on the location.

Important Exception: If goods or services are supplied to a Special Economic Zone (SEZ) unit or developer, even if they are in the same state, the supply is not considered intrastate.

GST on Inter-State and Intra-State Supplies

Under the GST system in India, the type of tax applied depends on whether the supply of goods or services is interstate (between two states or a state and a union territory) or intrastate (within the same state or union territory).

Interstate Supply

When goods or services move from one state to another, Integrated Goods and Services Tax (IGST) is charged.
Example: If a store in Maharashtra sells a laptop to a customer in Karnataka, and the GST rate is 18%, then IGST of ?18,000 will be charged on a product worth ?1,00,000.

Intrastate Supply

When the transaction happens within the same state, Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) are charged equally.
Example: If the same store in Maharashtra sells the laptop to a customer in Maharashtra, the 18% GST will be split into ?9,000 as CGST and ?9,000 as SGST.

The overall GST rate remains the same in both cases, only the way it is divided differs based on the type of supply.

GST on Interstate vs. Intrastate Supply: Meaning

Under the GST system, the type of supply, which means whether within the same state or between different states, determines the kind of tax that will be applied.

What is Intrastate Supply in GST?

When the buyer and supplier are in the same state or Union Territory, this is referred to as intrastate supply. Two forms of GST are imposed in this instance:

• Central Goods and Services Tax (CGST)
• State Goods and Services Tax (SGST)

These two taxes are charged equally on the transaction value. The total GST rate stays the same but is split into Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST).

What is Interstate Supply in GST?

Interstate supply happens when goods or services are sold from one state or Union Territory to another. In such cases, IGST is applied.

Integrated Goods and Services Tax (IGST) is collected by the central government and later shared between the state where the goods are consumed and the centre.

GST in the Case of Billing in Another State

Even if billing is done in a different state, the place of supply decides the tax type. If both the supplier and the buyer are in the same state, CGST and SGST are charged. If they are in different states, IGST is charged.

Summary

• Intrastate Supply = CGST + SGST
• Interstate Supply = IGST

This distinction is important for correct GST filing and tax payments.

Difference Between Interstate and Intrastate Supply under GST

In the GST system, the type of supply, interstate or intrastate, determines which tax is applied and who collects it. Here's a clear comparison between the two:

You have to understand whether a transaction is interstate or intrastate is important to apply the correct type of GST and ensure proper tax compliance. This classification also affects how input tax credit can be claimed and used.

Conclusion

If you know the difference between GST on interstate vs. intrastate supply, it is essential for proper tax calculation and compliance. While IGST applies to interstate transactions, CGST and SGST are charged on intrastate supplies. Correct classification also helps in claiming input tax credit effectively.

Online Legal India offers expert assistance with GST registration and filing. Whether you are managing local or interstate transactions, our team ensures accurate and timely compliance. Visit Online Legal India today.