What is Inter State GST and Intra State Supply Under GST

What is Inter State GST and Intra State Supply Under GST

GST Advantages

  • GST has abolished the cascading tax system, which a single indirect tax has replaced. 
  • It has the following advantages:
  • It is technology-driven, as opposed to previous methods, which required filling out forms and manually filing taxes.
  • One can complete all GST processes on the GST portal, from registration to tax filing.
  • Along with this, instead of filing the GST every month, the government allows them to file it quarterly or annually. The GST composition dealer is not liable to pay the IGST tax and has to pay it under the reverse charge mechanism. 
  • In case the reverse charge mechanism confuses the inBecause of the numerous legal formalities that must be followed, the taxation system is quite complex. 
  • The government of India implemented the Goods and Services Tax to revolutionize the country's taxation system (GST). 
  • This is a significant initiative for the nation's economic reform. 
  • Based on the concept of "One Market, One Tax," it consolidates all previous taxes into one, resulting in a uniform taxation system. 
  • GST aims to make doing business in the country easier by creating a common market. 
  • It has merged all other taxes, such as VAT, excise duty, and service taxes, into a single tax known as GST.
  • The supplier or buyer must pay the GST interstate or intrastate whether the supply is within the city or across the borders.
  • dividual about the tax payment, one can use the GST calculator to calculate the amount for the GST composition dealer. They also have the benefit of not maintaining the accounts for the taxes. It restrains the GST composition dealer from issuing tax invoices. Instead, one has to issue the bill of supply.
  • The GST amount can also be calculated online using the GST calculator.
  • The primary advantage of GST is that it has a high threshold amount, namely a turnover of 40 lacs for businesses. 
  • Businesses with a low turnover do not need to register for GST. 
  • This allows all small and medium-sized businesses to thrive without having to worry about tax payments.

The GST composition scheme

The government implemented the GST composition scheme to alleviate the burden of high taxes.

Only businesses with a turnover of more than 1.5 crores are eligible to participate in this scheme.

The GST composition dealer is required to pay taxes ranging from 1-6% of their turnover under the composition scheme.

The government implemented GST to revolutionize India's taxation system, and it is an initiative for economic reform in India. 

GST aims to simplify the filing of indirect taxes in the country. 

Whether the supplier/buyer must pay GST interstate or intrastate when supplying goods or services within or outside the state?

We will look further at their definitions and differences.

What exactly is GST Interstate Supply?

Interstate GST meaning is defined in section 7 of the IGST (Integrated Goods and Services Tax) Act[1] as the supply of goods and services from one state to another.

The GST Act defines interstate supply as occurring when the supplier's location and place of supply are:

In two different states, in two different Union Territories (UTs), or in both a state and a UT (UT).

The procurement of goods or services from one state to another will be referred to as interstate supply.

The supply of goods imported into India is also an interstate supply, even before they reach the customs station, and the supplier/buyer must pay GST interstate.

Interstate GST meaning includes the supply of goods and services to or by an SEZ (Special Economic Zone) unit or SEZ developer.

As an example,

ABC of Bangalore and XYZ of Maharashtra are the suppliers, with the former supplying goods to XYZ in Maharashtra. 

It falls under the category of interstate supply and is subject to interstate GST.

What about the intrastate supply?

As defined in Section 8 of the IGST (Integrated Goods and Services Tax) Act, GST intrastate supply is the supply of goods and services within the same State or UT (Union Territory). 

In other words, if the supplier's and buyer's locations are in the same state or Union Territory, the supply is intrastate, and GST for intrastate is applicable.

In all intrastate transactions, the seller is required to collect CGST and SGST from the buyer.

Nonetheless, supply to or by SEZ (Special Economic Zone) or SEZ developer should be referred to as intrastate supply rather than interstate supply.

As an example,

ABC of Bangalore and XYZ of Mysore are the two companies. 

ABC is the vendor that provides goods to XYZ. 

Because both companies are located in the same state, it falls under the category of intrastate supply and is subject to GST intrastate.

What is the distinction between interstate and intrastate GST, or simply what is interstate and intrastate in GST?

Intrastate vs interstate supply

GST interstate and GST intrastate significantly impact IGST, CGST, and SGST calculations. 

The former attracts IGST, while the latter attracts CGST and SGST.

The following are the significant differences between GST interstate and GST intrastate:

  • The interstate GST meaning attracts IGST (Integrated Goods and Services Tax).
  • The intrastate GST tax will be divided equally between the CGST and the SGST.
  • (CGST) and SGST (Central Goods and Services Tax) (State Goods and Services Tax).
  • The GST rate on intrastate supplies of goods and services will remain unchanged.
  • According to the current GST law, the taxes imposed on various goods and services are determined by the location of supply.
  • If the supply location is within the state, the intrastate GST will apply, attracting both CGST and SGST.
  • The CGST will be collected at the point of commerce; the SGST will be collected by the state where the supply occurs.
  • The centre will collect IGST if the supply is between two states, two union territories, or a state and a union territory. 
  • The IGST rate will be the sum of the CGST and SGST rates.

Example

An electronic store in Chennai, Tamil Nadu, sells an air conditioner for Rs. 1,20,000 to a store in Mumbai, Maharashtra; they must then pay interstate GST of Rs. 21,600 as IGST.

If the same store sells air conditioning to a store in Madurai, they must pay Rs. 10,800 in CGST and Rs. 10,800 in SGST, though the total amount payable remains the same.

This is an example of interstate GST, intrastate GST, and the amount levied.

Also read,

GST Services

Domestic Taxation & International Taxation Services

Transfer Pricing Services

Conclusion

Concluding, the concepts of GST interstate and GST intrastate are critical in determining the applicability of IGST, SGST, and CGST. 

To determine whether the GST rate applicable is interstate or intrastate, the supplier's and buyer's locations must be known.

FAQS

  • How will the GST affect intra-state transactions?

Every intrastate GST transaction involving a taxable supply of goods and services would be subject to both the central GST and the state GST (SGST). 

Furthermore, both would be advantageous. 

It is set at the same rate or value as Central GST Section 15.

  • How do you tell the difference between intrastate and interstate supplies?

Sections 7 and 8 of the IGST Act define interstate and intrastate supplies. 

Intrastate supplies occur when the supplier's location and the place of supply are both within the same state. In contrast, interstate supplies occur when the supplier's location and the place of supply are in different states.

  • How should we calculate the GST on intrastate billing for goods and services in another state?

The tax is levied following the type of supply. 

If you make a supply within a state, the tax is CGST SGST; if you make a supply between states, the tax is IGST.

  • What GST taxes must I pay if I supply a product across state lines?

The government deposits an integrated Goods and Service Tax in the case of an interstate GST of goods and services (IGST). 

No CGST (Central GST) or SGST (SGST) would be levied in this case.

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