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Inter-state supplies in GST

Definition of interstate supply

As per section 7 of the IGST Act, inter-state supply means,

  • Supply of goods or services where the location of the supplier and the place of supply are in two different states/ two different union territories/one state and one union territory,
  • Supply of goods imported into the territory of India till they cross the customs frontiers of India.
  • Supply of services imported into the territory of India
  • 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.

Illustrations

  1. Entity ABC in Indore (MP) supplied goods to XYZ in Gwalior (MP). This supply is not interstate in nature as the location of the supplier and place of supply is in the same state (MP)
  2. Entity PQR in Chennai supplied goods to MNO in Delhi. The location of the supplier and place of supply is in a different state. Hence, this supply is an inter-state supply.
  3. Export of goods or services.

How interstate supplies will be taxed under GST law?

Integrated tax (IGST) will be levied and collected by the Centre on inter-state supplies. The inter-state supplier will pay IGST on value addition after adjusting the available credit of IGST, CGST, and SGST. The supplier State will transfer to the Centre the credit of SGST used in payment of IGST. The purchasing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.

GST provisions applicable to interstate supplies

(1) In case of inter-state movement of goods exceeding the value of Rs 50,000, the transporter needs to carry an e-way bill.

(ii) As per section 24 of the CGST Act, it is mandatory for inter-state suppliers to take GST registration online.

(iii) Following inter-state supplies are exempt from the requirement of GST registration-

  • Inter-state supply of services and the aggregate value of such supplies not exceeding the exemption limit.
  • Inter-state supply of hand-crafted goods and the aggregate value of such supplies does not exceed the exemption limit
  • Job-workers having a turnover of less than the exemption limit. This clause shall not be applicable to jewellery, goldsmiths, and silversmiths wares, and other articles manufactured on a job work basis.

(iv) Interstate suppliers are not allowed to opt for GST composition scheme.


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CA Rupali Gupta

CA Rupali Gupta