Inter-State Supply or Intra-State Supply under GST Laws: A Comprehensive Guide

Inter-state and intra-state supply are two essential aspects of Goods and Services Tax (GST) laws that small and medium businesses and startup founders need to understand. GST laws have been introduced in India with the objective of simplifying the taxation structure and bringing uniformity in the tax regime. Under GST laws, all goods and services are taxed under a single tax system, which makes it easier for businesses to comply with the tax regulations. GST has replaced multiple indirect taxes like VAT, excise duty, and service tax with a single tax, i.e., GST.

Understanding the difference between inter-state and intra-state supply can help businesses to comply with the tax regulations and avoid any penalties. Let's understand these concepts in detail.

Inter-State Supply

An inter-state supply is a transaction that takes place between two different states in India. For example, when a supplier in Delhi sells goods to a buyer in Bangalore, it is an inter-state supply. Under GST laws, inter-state supplies are taxed under Integrated GST (IGST). IGST is a combination of Central GST (CGST) and State GST (SGST).

Let's take an example to understand this better. Suppose you are a supplier of electronic goods based in Delhi, and you sell goods worth Rs. 1,00,000 to a buyer in Bangalore. The GST rate applicable to electronic goods is 18%. In this case, the IGST charged would be 18%, i.e., Rs. 18,000. The buyer in Bangalore can claim this IGST as input tax credit while filing his GST returns.

Intra-State Supply

An intra-state supply is a transaction that takes place within the same state. For example, when a supplier in Delhi sells goods to a buyer in Noida, it is an intra-state supply. Under GST laws, intra-state supplies are taxed under CGST and SGST. The GST rate applicable to various products and services may differ from state to state.

Let's take an example to understand this better. Suppose you are a supplier of furniture based in Delhi, and you sell goods worth Rs. 1,00,000 to a buyer in Noida. The GST rate applicable to furniture in Delhi is 18%, out of which 9% is CGST and 9% is SGST. In this case, the CGST charged would be 9%, i.e., Rs. 9,000, and the SGST charged would be 9%, i.e., Rs. 9,000. The buyer in Noida can claim this CGST and SGST as input tax credit while filing his GST returns.

When is IGST Charged?

IGST is charged when goods or services are supplied from one state to another state, or when goods or services are supplied to a Union Territory (UT). If the supply is made within the same state, then CGST and SGST are charged.

Conclusion

Inter-state and intra-state supply are two important concepts under GST laws that small and medium businesses and startup founders need to understand. Inter-state supply refers to a transaction that takes place between two different states in India, while intra-state supply refers to a transaction that takes place within the same state. Inter-state supplies are taxed under IGST, while intra-state supplies are taxed under CGST and SGST. Understanding these concepts can help businesses to comply with the tax regulations and avoid any penalties.