What is inter state in GST

According to Section-7 of IGST Act 2017,

(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in-

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

 

shall be treated as a supply of goods in the course of inter-State trade or commerce.

 

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

 

(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in-

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

 

shall be treated as a supply of services in the course of inter-State trade or commerce.

(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.

(5) Supply of goods or services or both,-

(a) when the supplier is located in India and the place of supply is outside India;

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or

(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

 

In Simple Words:

Interstate supply refers to a scenario in which the provider of goods or services is located in a distinct state or Union Territory, and the destination or place of receipt of those goods or services is situated in another state or Union Territory. Additionally, supplies involving activities such as imports, exports, or transactions with Special Economic Zone (SEZ) units or Export-oriented Units (EOUs) are also categorized as interstate supplies. In the context of India's taxation system, the Central Government imposes the Integrated Goods and Services Tax (IGST) on interstate supplies of goods and services, ensuring uniform taxation and revenue distribution across states and Union Territories.

 

For Example: A Company XYZ Ltd, located in Indore, Madhya Pradesh, supplies LED Lamps worth Rs. 1,00,000 to Mumbai, Maharashtra, this transaction is categorized as an interstate supply. This is because the supplier is in Madhya Pradesh (one state) and the place of supply is in Maharashtra (a different state).

The applicable GST rate on the goods supplied is 18%. Therefore, IGST (Integrated Goods and Services Tax) is levied on this interstate supply. Here's how the IGST calculation works:

IGST Amount = Value of Supply * GST Rate

IGST Amount = Rs. 1,00,000 * 18% = Rs. 18,000

So, in this case, the dealer, Company ABC Ltd, will charge Rs. 18,000 as IGST to the customer in Mumbai, Maharashtra. This IGST amount is then paid to the Central Government. It's important to note that IGST is a unified tax collected by the Central Government, and a share of it is later distributed to the destination state, which in this case is Maharashtra. This ensures the seamless flow of goods and services across state borders while maintaining a fair revenue-sharing mechanism between states and the central government.

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