GST Interstate vs GST Intrastate

GST or Goods and Services Tax, was introduced in India on 1st July 2017. It includes two important parts interstate and intrastate GST. These parts help determine which taxes need to be paid  CGSST, IGST or SGST. Whether a transaction is considered interstate or intrastate depends on where the supplier is located and where the supply is made. This article simplifies the differences between interstate and intrastate GST and explains what these terms mean in simple language. 

What is Interstate Supply?

When goods or services are provided from one state to another or from a Union Territory to another, it's called interstate supply. This also includes transactions involving import, export, or trade with Special Economic Zones (SEZs) or Export-oriented Units (EOUs). The Central Government charges Integrated GST (IGST) on such transactions to ensure uniform taxation across states and territories.

When goods or services move between states, IGST is charged by the central government. The revenue collected through IGST is then distributed between the central and destination states based on a predetermined formula. This system ensures that businesses operating across state borders don't face multiple taxes and helps in the equitable sharing of tax revenue between the central and state governments.

What is Intrastate Supply?

ntrastate supply happens when both the provider of goods or services and the place of supply are within the same state. For such transactions, the Central Goods and Services Tax (CGST) and State/Union Territory Goods and Services Tax (SGST/UTGST) are applicable. These taxes are imposed by the Central and State/Union Territory governments respectively.

The rate of Intrastate GST depends on the type of goods or services being supplied. Vendors must collect both CGST and SGST/UTGST from customers in these transactions.

Difference between GST interstate & GST intrastate

The below table shows the main differences between GST for transactions happening between different states (interstate) and those happening within the same state (intrastate) in India.

Interstate and Intrastate GST Rate With Examples

GST rates for transactions within a state and between states vary based on the type of goods or services involved. In India, GST rates fall into four categories 5%, 12%, 18%, and 28%. Some high value goods have special rates while certain essential goods are taxed at a Nil rate.

Interstate GST Rate Example

XYZ Ltd, based in Jaipur, Rajasthan sells mobile phones worth ₹1,00,000 to Mumbai, Maharashtra. Since the sale is between different states, it's called an interstate supply. The mobile phones fall under the 18% GST slab.

To calculate the IGST, we multiply the value of the goods (₹1,00,000) by the GST rate (18%), which equals ₹18,000. This IGST amount of ₹18,000 is charged by XYZ Ltd and paid to the Central Government. Later, it's distributed between the Central Government and the destination state, Maharashtra.

In a special case, if XYZ Ltd sells goods from Jaipur, Rajasthan to a Special Economic Zone unit within Rajasthan, it's also treated as an interstate supply. This applies to all transactions involving SEZ units.

Intrastate GST Rate Example

XYZ Ltd, based in Jaipur, Rajasthan sells mobiles worth ₹2,00,000 to another company in Udaipur, Rajasthan. GST rate is 18% divided equally into 9% CGST and 9% SGST.

To calculate CGST/SGST, we multiply the value of goods (₹2,00,000) by the GST rate (18%), which equals ₹36,000. This amount is split equally with ₹18,000 paid as CGST to the Central Government and ₹18,000 paid as SGST to the Rajasthan Government.

Both CGST and SGST are charged by the Central and state governments, respectively. However, the combined rate of CGST and SGST equals the IGST rate charged on interstate supplies. So, the total tax amount remains the same regardless of whether it's an interstate or intrastate supply. The difference lies in how the tax is levied.

Understanding the difference between GST for transactions between different states (interstate) and within the same state (intrastate) is crucial. It depends on where the supplier is located and where the buyer is located. This helps determine whether IGST, SGST, and CGST apply.