Inter-State Supply or Intra-State Supply under GST Laws

As a small or medium business owner or startup founder in India, it is crucial to familiarize yourself with the complex laws surrounding the Goods and Services Tax (GST). One key aspect of GST that you need to understand is the difference between inter-state supply and intra-state supply.

What is Inter-State Supply?

Inter-State Supply is a transaction where goods or services are supplied from one state to another state. For example, if you're a business owner in Delhi and you purchase goods from a supplier in Mumbai, it is considered an inter-state supply. GST laws define inter-state supply as a supply that involves the movement of goods or services from one state to another state, Union Territory or a foreign country.

What is Intra-State Supply?

Intra-State Supply, on the other hand, is a transaction where goods or services are supplied within the same state. For example, if you're a business owner in Mumbai and you purchase goods from a supplier in the same city, it is considered an intra-state supply. GST laws define intra-state supply as a supply that does not involve the movement of goods or services from one state to another state, Union Territory or a foreign country.

GST Laws for Inter-State Supply

Inter-State Supply is subject to Integrated Goods and Services Tax (IGST). IGST is a tax levied by the central government on inter-state transactions. The tax is collected by the central government and then distributed between the state governments in proportion to the destination of the goods or services. The IGST rate varies depending on the type of goods or services being supplied.

When you make an inter-state supply, you will need to obtain an Integrated Goods and Services Tax Identification Number (GSTIN). This number is used to identify your business in inter-state transactions and helps the government keep track of your tax liabilities.

GST Laws for Intra-State Supply

Intra-State Supply is subject to Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST). CGST is a tax levied by the central government on intra-state transactions, while SGST is a tax levied by the state government on intra-state transactions.

When you make an intra-state supply, you will need to obtain a State Goods and Services Tax Identification Number (GSTIN). This number is used to identify your business in intra-state transactions and helps the government keep track of your tax liabilities.

When to Charge IGST, CGST or SGST?

The decision to charge IGST, CGST, or SGST depends on the type of transaction you're making. Inter-state transactions are subject to IGST, while intra-state transactions are subject to CGST and SGST. If you're making an inter-state supply, you will need to charge IGST, while if you're making an intra-state supply, you will need to charge both CGST and SGST.

Conclusion

Inter-state supply and intra-state supply are two key concepts under GST laws that small and medium business owners and startup founders in India need to understand. Familiarizing yourself with the difference between the two can help you avoid costly tax penalties and ensure compliance with GST laws.