What is What is the difference between intra-state and inter-state supply under GST?, and how does it function in India?
Under India’s Goods and Services Tax (GST) framework, the distinction between intra-state and inter-state supply is critical because it determines which tax is levied and the mechanism for collection.
1. Key Differences Between Intra-State and Inter-State Supply
| Feature | Intra-State Supply | Inter-State Supply |
| Definition | Supply of goods or services where the supplier and recipient are located in the same state or union territory. | Supply of goods or services where the supplier and recipient are in different states, union territories, or one is located outside India. |
| Taxes Applicable | Central GST (CGST) and State GST (SGST) (or UTGST for Union Territories). Both are collected concurrently by the Centre and the State. | Integrated GST (IGST), collected solely by the Central Government. |
| Place of Supply Rules | Determined as per Section 10 and 12 of the IGST Act. Typically, the location of the recipient. | Determined as per Sections 7 and 8 of the IGST Act. Usually based on the destination of supply. |
| Tax Collection | Both the state and central governments collect their share. | Central Government collects IGST, which is later shared with the states. |
| Example | A supplier in Maharashtra sells goods to a buyer in Maharashtra. | A supplier in Maharashtra sells goods to a buyer in Gujarat. |
2. Relevant Provisions Under GST Law
- Intra-State Supply:
- Covered under Section 8 of the IGST Act.
- Both CGST and SGST/UTGST are applicable at the same rate, and their combined effect equals the applicable GST rate for the goods/services.
- Inter-State Supply:
- Defined under Section 7 of the IGST Act.
- IGST is applicable, calculated at the full GST rate without bifurcation.
- Place of Supply Rules:
- Critical to determining whether a supply is intra-state or inter-state.
- Governed by Sections 10 to 13 of the IGST Act:
- Section 10: Place of supply of goods.
- Section 12: Place of supply for services (domestic).
- Section 13: Place of supply for services (international).
3. Landmark Cases on Intra-State and Inter-State Supply
- Coastal Gujarat Power Limited v. State of Gujarat (2020)
- Issue: Dispute over whether the supply of electricity was intra-state or inter-state.
- Judgment: Clarified the application of place of supply rules in determining the nature of the transaction.
- Indian Oil Corporation Ltd. v. Commissioner of Commercial Taxes (2019)
- Issue: Sale of petroleum products across state borders and classification of supply.
- Judgment: Highlighted the significance of movement of goods for inter-state supply classification.
- Bajaj Electricals Ltd. v. Union of India (2021)
- Issue: Wrong classification of a supply as intra-state instead of inter-state.
- Judgment: Emphasized the need for precise identification of supplier and recipient locations under place of supply rules.
- Advance Ruling in the Case of M/s Rajashri Foods Pvt. Ltd. (Karnataka AAR, 2021)
- Issue: Classification of supply to a Special Economic Zone (SEZ).
- Judgment: Confirmed that supply to SEZs constitutes inter-state supply under GST.
Understanding whether a supply is intra-state or inter-state is essential for compliance under GST, as incorrect classification can lead to tax mismatches, penalties, and interest.