Intra-state or Inter-state Supply in EX Works Contracts: Revised GST Law

GST or Goods and Services Tax is an indirect tax that has replaced a plethora of indirect taxes in India. It was implemented on July 1, 2017, and has since undergone several revisions. One of the most significant changes in the GST law pertains to intra-state and inter-state supply in EX works contracts. In this article, we will discuss the revised GST law and its impact on businesses that deal with such contracts.

What are EX works contracts?

EX works contracts are agreements between a buyer and a seller that require the buyer to collect goods directly from the seller's premises. In such contracts, the seller is responsible only for making the goods available at their premises. The buyer bears all the costs associated with the transportation and insurance of the goods from the seller's premises to the destination.

What is intra-state and inter-state supply?

Before we delve into the revised GST law, let's first understand the difference between intra-state and inter-state supply.

Intra-state supply refers to the sale of goods or services within the boundaries of a state. For example, if a business in Maharashtra sells goods to a buyer in Maharashtra, it is an intra-state supply.

Inter-state supply, on the other hand, refers to the sale of goods or services from one state to another. For example, if a business in Maharashtra sells goods to a buyer in Karnataka, it is an inter-state supply.

Key changes in the Revised GST Law

The revised GST law has made several changes to the taxation of goods and services in EX works contracts. Here are the key changes:

1. Intra-state supply

In the case of intra-state supply, the seller is now required to charge IGST (Integrated Goods and Services Tax) instead of SGST (State Goods and Services Tax) and CGST (Central Goods and Services Tax). This means that the buyer will have to pay a single tax, i.e., IGST, instead of two separate taxes.

2. Inter-state supply

In the case of inter-state supply, the seller is required to charge IGST instead of CGST and SGST. This means that the buyer will have to pay a single tax, i.e., IGST, instead of two separate taxes.

3. Time of supply

The revised GST law has also changed the time of supply for EX works contracts. In the case of intra-state supply, the time of supply is now the date on which the goods are made available to the buyer. In the case of inter-state supply, the time of supply is now the date on which the goods are dispatched from the seller's premises.

4. Exemption for small businesses

The revised GST law has exempted small businesses with an annual turnover of up to Rs. 20 lakhs from registering under GST. This exemption applies to both intra-state and inter-state supply.

Impact on Businesses

The revised GST law has several implications for businesses that deal with EX works contracts. Here are some of the key impacts:

1. Increased compliance

Businesses will now have to comply with the revised GST law and charge IGST instead of CGST and SGST. This may increase the compliance burden for businesses.

2. Simplified taxation

The revised GST law has simplified the taxation of EX works contracts by requiring businesses to charge a single tax, i.e., IGST. This may make it easier for businesses to comply with the tax laws.

3. Implications for pricing

The revised GST law may have implications for the pricing of goods and services. Businesses may need to adjust their prices to account for the changes in the tax structure.

4. Impact on supply chain

The revised GST law may also have an impact on the supply chain of businesses. Businesses may need to review their supply chain and logistics to ensure compliance with the new tax laws.

Conclusion

The revised GST law has made several changes to the taxation of EX works contracts. Businesses that deal with such contracts will need to comply with the new tax laws and charge IGST instead of CGST and SGST. The revised law has simplified the tax structure for businesses, but it may also increase the compliance burden. Businesses may need to adjust their prices and review their supply chain to ensure compliance with the new tax laws.