Interstate and Intrastate GST: Definitions, Rates, Examples, and Differences
Interstate and Intrastate GST: Definitions, Rates, Examples, and Differences
Mar 21, 2024
15 Mins
Interstate and Intrastate GST: Definitions, Rates, Examples, and Differences
As of July 1st, 2017, the GST, or Goods and Service Tax, has been in effect in India. Understanding the concepts of interstate and intrastate GST is crucial as it determines which type of GST, whether IGST, CGST, or SGST, should be paid. The classification of a supply as interstate or intrastate depends on the location of the supplier and the place of supply. In this article, we will explore the distinctions between interstate and intrastate GST and provide a comprehensive explanation of their meanings under GST law.
Interstate GST: What it means
Interstate supply refers to situations where the provider of goods or services is located in one state or Union Territory, and the place of supply is in another state or Union Territory. This definition also encompasses supplies involving import, export, or transactions with Special Economic Zones (SEZ) units or Export-oriented Units (EOU). In such cases, the Central Government imposes the integrated GST (IGST) on goods and services supplied across state boundaries.
When goods and services are transported from one state to another, the Central Government levies IGST, which is then distributed to the destination state. The revenue generated from IGST is shared between the central and state governments based on a predetermined formula. This system ensures equitable tax distribution and avoids burdening businesses operating in multiple states with multiple taxes.
Intrastate GST: What it entails
Intrastate supply occurs when the supplier and the place of supply of goods or services are within the same state. Such supplies are subject to Central Goods and Services Tax (CGST) and State Goods and Services Tax/Union Territory Goods and Services Tax (SGST/UTGST). Both the Central and State/UT governments levy these taxes, respectively.
The intrastate GST rate varies based on the type of goods or services being supplied. Vendors are required to collect both CGST and SGST from customers in intrastate transactions.
Comparing Interstate and Intrastate GST Rates with Examples
The rates of GST on interstate and intrastate supplies depend on the specific goods or services involved. In India, GST rates are categorized into four slabs: 5%, 12%, 18%, and 28%. Additionally, special rates apply to certain high-value goods, while some essential goods have a Nil rate.
Now that we have explained the meanings of interstate and intrastate supplies, let us delve into how GST is calculated for each type with the help of examples.
Example of Interstate GST Rate
Suppose a company called ABC Ltd., located in Jaipur, Rajasthan, supplies mobile phones worth Rs.1,00,000 to Mumbai, Maharashtra. This supply is considered interstate. The goods fall under the 18% GST slab. Integrated GST (IGST) is levied by the Central Government, with a portion being paid to the destination state.
IGST Calculation: 1,00,000 * 18% = Rs. 18,000
ABC Ltd. will charge Rs. 18,000 as IGST. This amount is then paid to the Central Government and distributed between the Centre and the destination state, Maharashtra, according to the predetermined allocation.
It is worth noting that supplies from Jaipur, Rajasthan, to a Special Economic Zone (SEZ) unit within Rajasthan are also classified as interstate supplies. All goods and services supplied to or from an SEZ unit fall under the interstate category.
Example of Intrastate GST Rate
Let's consider ABC Ltd. again, but this time, they supply mobile phones worth Rs. 2,00,000 to a different entity located in Udaipur, Rajasthan. As the supply and place of supply are within the same state, this transaction is classified as intrastate. The GST rate charged is 18%, which is divided as 9% CGST and 9% SGST.
CGST/SGST Calculation: Rs. 2,00,000 * 18% = Rs. 36,000
In this case, Rs. 18,000 represents CGST, while the other Rs. 18,000 represents SGST.
ABC Ltd. collects a total of Rs. 36,000, of which Rs. 18,000 is paid as CGST to the Central Government, and Rs. 18,000 is paid to the Rajasthan Government.
CGST/SGST is levied by both the Central Government and state governments, respectively. However, the combined rate of CGST and SGST matches the rate of IGST levied. Thus, regardless of whether it is an interstate or intrastate supply, the total tax amount remains the same, with the only difference lying in the method of levying.
Distinguishing Between Interstate and Intrastate GST
This table summarizes the key distinctions between interstate and intrastate GST in India:
Parameters Interstate Supplies Intrastate Supplies
Applicable to Goods and services supplied between different states and Union Territories Goods and services supplied within the same state or union territory
Levied by Central Government CGST by the Central Government and SGST/UTGST by the state/Union Territory government
Tax rate IGST rate determined based on the goods or services CGST and SGST rates applied separately and equally, determined by the goods or services
Destination state Receives a share of the IGST collected Receives the full amount of SGST collected
Place of supply Different state than the supplier's location Same state as the supplier's location
Input Tax Credit The input tax credit of IGST can be utilized to offset IGST liability, followed by CGST/SGST liabilities in any order CGST credit and SGST credit can be used to offset CGST liabilities and SGST liabilities, respectively, once the IGST credit has been fully utilized. Inter-utilization between CGST and SGST is not permitted.
Overall, Interstate GST and Intrastate GST are two distinct forms of GST in India, with their applicability determined by the supplier's location and the place of supply. The primary difference between the two lies in how taxes are levied.
Interstate and Intrastate GST: Definitions, Rates, Examples, and Differences
As of July 1st, 2017, the GST, or Goods and Service Tax, has been in effect in India. Understanding the concepts of interstate and intrastate GST is crucial as it determines which type of GST, whether IGST, CGST, or SGST, should be paid. The classification of a supply as interstate or intrastate depends on the location of the supplier and the place of supply. In this article, we will explore the distinctions between interstate and intrastate GST and provide a comprehensive explanation of their meanings under GST law.
Interstate GST: What it means
Interstate supply refers to situations where the provider of goods or services is located in one state or Union Territory, and the place of supply is in another state or Union Territory. This definition also encompasses supplies involving import, export, or transactions with Special Economic Zones (SEZ) units or Export-oriented Units (EOU). In such cases, the Central Government imposes the integrated GST (IGST) on goods and services supplied across state boundaries.
When goods and services are transported from one state to another, the Central Government levies IGST, which is then distributed to the destination state. The revenue generated from IGST is shared between the central and state governments based on a predetermined formula. This system ensures equitable tax distribution and avoids burdening businesses operating in multiple states with multiple taxes.
Intrastate GST: What it entails
Intrastate supply occurs when the supplier and the place of supply of goods or services are within the same state. Such supplies are subject to Central Goods and Services Tax (CGST) and State Goods and Services Tax/Union Territory Goods and Services Tax (SGST/UTGST). Both the Central and State/UT governments levy these taxes, respectively.
The intrastate GST rate varies based on the type of goods or services being supplied. Vendors are required to collect both CGST and SGST from customers in intrastate transactions.
Comparing Interstate and Intrastate GST Rates with Examples
The rates of GST on interstate and intrastate supplies depend on the specific goods or services involved. In India, GST rates are categorized into four slabs: 5%, 12%, 18%, and 28%. Additionally, special rates apply to certain high-value goods, while some essential goods have a Nil rate.
Now that we have explained the meanings of interstate and intrastate supplies, let us delve into how GST is calculated for each type with the help of examples.
Example of Interstate GST Rate
Suppose a company called ABC Ltd., located in Jaipur, Rajasthan, supplies mobile phones worth Rs.1,00,000 to Mumbai, Maharashtra. This supply is considered interstate. The goods fall under the 18% GST slab. Integrated GST (IGST) is levied by the Central Government, with a portion being paid to the destination state.
IGST Calculation: 1,00,000 * 18% = Rs. 18,000
ABC Ltd. will charge Rs. 18,000 as IGST. This amount is then paid to the Central Government and distributed between the Centre and the destination state, Maharashtra, according to the predetermined allocation.
It is worth noting that supplies from Jaipur, Rajasthan, to a Special Economic Zone (SEZ) unit within Rajasthan are also classified as interstate supplies. All goods and services supplied to or from an SEZ unit fall under the interstate category.
Example of Intrastate GST Rate
Let's consider ABC Ltd. again, but this time, they supply mobile phones worth Rs. 2,00,000 to a different entity located in Udaipur, Rajasthan. As the supply and place of supply are within the same state, this transaction is classified as intrastate. The GST rate charged is 18%, which is divided as 9% CGST and 9% SGST.
CGST/SGST Calculation: Rs. 2,00,000 * 18% = Rs. 36,000
In this case, Rs. 18,000 represents CGST, while the other Rs. 18,000 represents SGST.
ABC Ltd. collects a total of Rs. 36,000, of which Rs. 18,000 is paid as CGST to the Central Government, and Rs. 18,000 is paid to the Rajasthan Government.
CGST/SGST is levied by both the Central Government and state governments, respectively. However, the combined rate of CGST and SGST matches the rate of IGST levied. Thus, regardless of whether it is an interstate or intrastate supply, the total tax amount remains the same, with the only difference lying in the method of levying.
Distinguishing Between Interstate and Intrastate GST
This table summarizes the key distinctions between interstate and intrastate GST in India:
Parameters Interstate Supplies Intrastate Supplies
Applicable to Goods and services supplied between different states and Union Territories Goods and services supplied within the same state or union territory
Levied by Central Government CGST by the Central Government and SGST/UTGST by the state/Union Territory government
Tax rate IGST rate determined based on the goods or services CGST and SGST rates applied separately and equally, determined by the goods or services
Destination state Receives a share of the IGST collected Receives the full amount of SGST collected
Place of supply Different state than the supplier's location Same state as the supplier's location
Input Tax Credit The input tax credit of IGST can be utilized to offset IGST liability, followed by CGST/SGST liabilities in any order CGST credit and SGST credit can be used to offset CGST liabilities and SGST liabilities, respectively, once the IGST credit has been fully utilized. Inter-utilization between CGST and SGST is not permitted.
Overall, Interstate GST and Intrastate GST are two distinct forms of GST in India, with their applicability determined by the supplier's location and the place of supply. The primary difference between the two lies in how taxes are levied.
Author
Pluto Team
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