Inter State supply v/s Intra State supply in GST

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GST is a dual model tax implemented in India, where both Central Government and state Government can levy GST simultaneously. If a transaction happens between same state, then both Central Government and State Government levy GST i.e., Central Goods and Services tax (CGST) and State Goods and Services tax (SGST) or if transaction occurs in union territory, then instead of SGST, Union Territory Goods and Service tax (UTGST) will be levied and if transaction occurs between two different states, or one state and one Union territory or as the case maybe, then Integrated Goods and Services tax shall be levied.

For every transaction, the classification is important, because accordingly GST would be levied.

The transaction can either be Inter-state supply or it can be Intra-state supply. Now let find out what our GST Act talks about.

Interstate Supply- As per section 7 of IGST Act, 2017, any supply of goods or services where place of supply and location of supplier, is in

two different states or
two different union territories, or
a state and a union territory

then such supply shall be Interstate supply and accordingly, IGST would be charged.

Intrastate Supply– As per Section 8 of IGST Act, 2017, any supply of goods or services where place of supply and location of supplier, is in

within same state or
within same union territories

then such supply shall be Intrastate supply and accordingly, CGST and SGST/UTGST would be charged.

This classification is very important as if a transaction is wrongly applied, then tax will be paid incorrectly under incorrect head. In such a case, taxpayer need to ask for refund from tax authorities which may cause fund blockage specially in case of high-value transactions.

The most important factor for determining classification or nature of supply is place of supply and location of supplier. Identification of Location of supplier is not very challenging as in most of the cases, location of supplier will be its office address registered for GST purpose or in case of multiple offices, the location that is most directly related to transaction. The complex part is to identify place of supply where our GST laws provides special guidelines which is different in case of goods when compared with services. It also lists down some of the special cases that how to identify place of supply (For more details, you may refer place of supply rules article on our Blog section).

I hope you like reading our above article. In case you have any questions, please feel free to contact us.

Read our article on Concept of Supply