Interstate And Intrastate Supply

 WHAT IS INTER STATE 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:
  • Two distinctive states; 
  • Two distinctive Union Territory; or
  • 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.

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