What is an inter-state supply under GST?
An inter-state supply is a supply where the supplier’s location and the place of supply are in two different states or union territories. It is charged as IGST. A supply where both are in the same state is intra-state, and it is charged as CGST plus SGST.
What makes a supply inter-state?
The IGST Act treats a supply as inter-state when the location of the supplier and the place of supply are not in the same state or union territory. Goods that move are generally supplied at the place where the movement ends for delivery. A service follows the place-of-supply rule for that service, which is not always the customer’s billing address.
Exports, and supplies to a special economic zone, are treated as inter-state. They are zero-rated when the conditions are met. They are not intra-state sales with a zero rate typed in by hand.
What makes a supply intra-state?
Intra-state means the supplier and the place of supply are in one state or one union territory. A sale across the city is intra-state. A sale from Jaipur to Ahmedabad is inter-state, because Rajasthan and Gujarat are different states, even when the same company owns both ends.
Two GSTINs of one PAN in two states do not turn a supply into intra-state. The locations on that invoice decide it.
Which tax is charged?
| Supply | Tax on the invoice |
|---|---|
| Intra-state | CGST and SGST, or CGST and UTGST |
| Inter-state | IGST |
The rate is the rate notified for that HSN or SAC. IGST is that full rate. CGST and SGST are each half of it, unless a notification splits them differently. The same invoice does not carry IGST and SGST together.
Two states, IGST. If the supplier and the place of supply are in different states, the invoice shows IGST.
What does the invoice show?
The tax invoice names the place of supply and the tax that follows from it. Those fields are on the GST invoice page. A wrong place of supply puts the tax in the wrong ledger and shows up when GSTR-1 is matched.
Inter-state supply of goods is a compulsory registration under section 24, even below the turnover line on the GST registration page. A composition dealer cannot make that outward supply of goods.
Frequently asked questions
Four questions cover place of supply, the tax charged, registration, and composition.
Does the customer’s state decide the tax?
The place of supply decides it, together with the supplier’s location. For a simple sale of goods that move, the place of supply is where the goods are delivered. The invoice names that place.
Is IGST a third tax on top of CGST and SGST?
No. An inter-state supply is charged IGST. An intra-state supply is charged CGST and SGST. The same supply is not charged all three.
Must a person who sends goods to another state be registered?
Yes. Inter-state supply of goods needs a GSTIN even when turnover is under the section 22 threshold. Inter-state supply of services stays optional while turnover is under that threshold.
Can a composition dealer make an inter-state sale of goods?
No. A person who makes inter-state outward supplies of goods cannot opt for the composition scheme.
Sources
Inter-state supply is defined in the IGST Act. The registration consequence is section 24 of the CGST Act.