On July 1st, 2017, India implemented the Goods and Services Tax (GST), necessitating an understanding of interstate and intrastate GST to determine the applicable taxes: IGST, CGST, or SGST. The distinction between these GST types hinges on the supplier's location and the place of supply. Here, we'll explore the definitions and differences of interstate and intrastate GST, as outlined by GST law.

Interstate GST: Meaning and Application

Interstate supply involves goods or services provided where the supplier resides in one state or Union Territory and the place of supply is in another. This also includes transactions such as import/export or deals with Special Economic Zones (SEZ) and Export-oriented Units (EOU). For such cross-state transactions, the Central Government levies the Integrated GST (IGST).

When goods/services move between states, IGST is collected by the Central Government, then allocated to the destination state. This revenue-sharing model supports equitable tax distribution and eases the tax burden on businesses operating across multiple states.

Intrastate GST: Definition and Implications

Intrastate supplies occur within the same state for both supplier and place of supply, attracting Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST)/Union Territory Goods and Services Tax (UTGST). These taxes are charged by both state/UT and Central governments, respectively.

The intrastate GST rate depends on the goods/services supplied, with vendors required to collect both CGST and SGST in transactions within a single state.

GST Rate Comparison with Examples

GST rates for interstate and intrastate supplies in India fall into slabs: 5%, 12%, 18%, and 28%, with special rates for certain products and exemptions for essential items. Let's examine GST calculations in practical scenarios.

Example of Interstate GST Rate Calculation:

If ABC Ltd. in Jaipur, Rajasthan, supplies phones worth Rs.1,00,000 to Mumbai, Maharashtra, the supply is interstate. The phones are in the 18% GST slab. The Central Government levies IGST:

IGST Calculation: Rs. 1,00,000 * 18% = Rs. 18,000

ABC Ltd. collects Rs. 18,000 as IGST, remitting it to the Central Government, which shares it with Maharashtra.

Note: Supplies to a Special Economic Zone (SEZ) unit in the same state (Rajasthan) still qualify as interstate.

Example of Intrastate GST Rate Calculation:

If ABC Ltd. supplies phones worth Rs. 2,00,000 to a Udaipur-based entity in Rajasthan, it's an intrastate transaction. The 18% GST rate splits into 9% CGST and 9% SGST:

CGST/SGST Calculation: Rs. 2,00,000 * 18% = Rs. 36,000

Here, Rs. 18,000 goes to CGST and Rs. 18,000 to SGST.

ABC Ltd. collects Rs. 36,000 in total, submitting Rs. 18,000 each to Central and Rajasthan Governments.

CGST/SGST structure by both governments ensures the combined rate matches IGST. Thus, total tax amounts remain constant across interstate and intrastate supplies, differing only in levy methods.

Key Differences Between Interstate and Intrastate GST

The table below highlights the contrasts between interstate and intrastate GST in India:

• Application: Interstate for inter-state/territorial supplies, Intrastate for within-state supplies.
• Levy: IGST by Central; CGST/SGST by central/state governments.
• Rate: IGST rates determined by goods/services; CGST/SGST applied equally by goods/services.
• Destination: Inter-state IGST shared between center and destination state; intrastate SGST stays with the state.
• Place of Supply: Differs for interstate; same for intrastate.
• Input Tax Credit Utilization: Inter-utilization possible only after IGST claims for intrastate supplies.

Ultimately, Interstate and Intrastate GST are distinguished by supplier location and supply place. Their key divergence lies in tax levying processes.