What
is Interstate of Supply?
- Under GST, inter-state supply will
be named the procurement of goods or services from one state to another.
- The GST Act specifies domestic
supply as when the supplier ‘s position and the place of supply are:
o Two
distinctive states;
o Two
distinctive Union Territory; or
o State
and a Union territory.
- The supply of goods imported into
India is often known as an inter-state supply before they reach the
customs station.
- Supplies of goods or services are
known as interstate supplies from or to a particular development zone or
an exclusive economic zone.
- The trade would become an
inter-state supply if the supplier‘s position and the delivery place are
in separate countries.
- For example - If a company A in the State of Punjab
supplies products to Company B in Madhya Pradesh, then it comes under the
category of inter-state supply.
WHAT IS INTRA STATE OF SUPPLY?
- Under GST, intra-state supply occurs
when the distribution of goods and services takes place within the same
state or union territory of the Country.
- The distribution of goods or
services intra-State is when the provider‘s position and place and the
buyer’s location, are the same.
- A seller must obtain both CGST
and SGST from the buyer in the intra-State
transactions.
- The CGST is deposited with the Government of the
Central, and SGST is filed with the
State Government.
- For example – when a company has
supplied to Lucknow (in the State of Uttar Pradesh) goods from the Kanpur factory,
both sides in Uttar Pradesh are considered an intrastate supply.
- This means that, if the supplier‘s
position and the delivery place is within the same State, supply is an
intra-State supply.
GST
ON INTRA STATE AND INTER STATE SUPPLY
- Interstate supply under GST attracts
an Integrated Goods and Services Tax i.e. IGST.
- Both the Central Goods and
Service Tax (CGST) and the State Goods and Services Tax (SGST) apply on an intra-state supply.
- For intrastate supply, the GST rate
will remain the same for the goods or services. The GST tax rate shall,
however, be split into two headings equally: SGST and CGST.
- If the transaction constitutes an
intra-state supply of goods and services, the central GST (CGST) is
collected by the Center of Commerce, and the State GST (SGST) is received
by the State where the supply occurs.
- In the case of the interstate supply
of goods and services, the Centre collects integrated GST (IGST). CGST and
SGST will not be charged in this case.
- The IGST rate will be equal to the
CGST plus SGST rate.
- For instance - When tax on a
particular commodity are 18%, the intra-state supply should be charged at
@ 9% CGST and at 9% SGST and the Interstate supply known as IGST is
charged 18% (i.e., 9% + 9%).
WHY WOULD SUPPLY BE DIFFERENTIATED?
There are four pillars
of taxes under the GST system, i.e., CGST, SGST, UTGST, and IGST.
When an intra-State supply is decided, CGST and SGST / UTGST are charged and
payable, while IGST is chargeable and payable in inter-state supply.
It is therefore well
established that different taxes are to be paid on the corresponding supplies.
The determination of supply for intra-State and inter-State supplies is
becoming more important.