GST Interstate Vs Intrastate Supply: What is the Difference?

Last Updated at: April 20, 2020
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GST Interstate Vs Intrastate Supply_ What is the Difference_

The taxation system is quite complex because of the number of legal formalities that accompany it. To bring a revolution in the taxation system of India, the government introduced the Goods and Services Tax (GST). This is a significant initiative for the economic reform of the nation. Based on the notion of “One Market, One Tax”, it streamlines all the previous taxes into one leading to a uniform taxation system. GST aims at easing the process of carrying out a business in the country, forming a common market. It has replaced all the other taxes, including VAT, excise duty, service taxes, etc., into a common tax named GST. Whether it be a supply of goods and services within the city or across the borders, the supplier or the buyer has to pay the GST interstate or intrastate. 

  1. Benefits of GST
  2. Composition scheme under GST
  3. GST interstate vs intrastate supply meaning
  4. Example to explain the GST interstate vs intrastate supply meaning
  5. Conclusion

 

Benefits of GST

GST has led to the eradication of the cascading tax system, replacing it with one indirect tax. It serves the following benefits:

  • It is technology-driven, unlike the earlier methods when one had to fill the form and file the taxes manually. 
  • For GST, one can complete all the processes right from registration to the tax filing on the GST portal. 
  • One can even calculate the GST amount using the GST calculator online. 
  • The major benefit of GST is that it has a high threshold amount, i.e., a turnover of 40 lacs for the businesses. Businesses having lesser turnover need not register themselves for GST. This provides all the small and medium enterprises to flourish their business without worrying about tax payments. 

Composition scheme under GST

To reduce the burden of high taxes, the government introduced the composition scheme under GST.

  • Under this scheme, only the businesses having a turnover of over 1.5 crores can register. 
  • According to the composition scheme, the GST composition dealer has to pay taxes somewhere between 1-6% of their turnover.
  •  Along with this, instead of filing the GST every month, the government allows them to file it quarterly or annually. The GST composition dealer is not liable to pay the IGST tax and has to pay it under the reverse charge mechanism.
  • In case the reverse charge mechanism confuses the individual about the tax payment, one can use the GST calculator to calculate the amount for the GST composition dealer. They also have the benefit of not maintaining the accounts for the taxes. 
  • It restrains the GST composition dealer from issuing tax invoices. Instead, one has to issue the bill of supply.
Get Online GST Registration

GST interstate vs intrastate supply meaning

The GST interstate vs intrastate supply meaning is vital to understand the importance of IGST (Integrated Goods and Services Tax), CGST (Central Goods and Services Tax), and SGST (State Goods and Services Tax). 

In simple terms, interstate means between two states and intrastate means in between the state itself. 

GST Interstate: According to GST, when the supply of goods and services takes place across the borders of two states or union territories, it is called the interstate supply of GST. Under the interstate supply, one has to pay only the IGST, and not CGST or SGST. The GST interstate also includes the supplies made by the SEZ (Special Economic Zone).

GST Intrastate: The intrastate supply in GST is when the supply of goods and services takes place within the state. Under this, the individual has to pay both CGST and SGST. This does not mean that there is an increase in the tax. Rather, it is equal to IGST and is just divided equally in the name of CGST and SGST. In the intrastate supply in GST, both the supplier and buyer belong to the same state. 

Example to explain the GST interstate vs intrastate supply meaning

Consider a situation:

If an electronic store based in Chennai, Tamil Nadu sells an AC worth ₹1,20,000, to another store in Mumbai, Maharashtra, they have to pay a tax of ₹21,600 as IGST. However, if the same store sells the AC to another store in Madurai, then they have to pay a tax of ₹10,800 as CGST and ₹10,800 as SGST, the total amount remains the same. This is the easiest example for the intrastate supply in GST and interstate supply, and the tax amount that has to be paid. 

Conclusion

The GST is one of the best tax reforms in Indian history, with several benefits in the short-term and long-term. In case you have any issues to calculate the GST amount, you can easily do so by using the GST calculator according to the tax rates and supply. 

 

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GST Interstate Vs Intrastate Supply: What is the Difference?

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The taxation system is quite complex because of the number of legal formalities that accompany it. To bring a revolution in the taxation system of India, the government introduced the Goods and Services Tax (GST). This is a significant initiative for the economic reform of the nation. Based on the notion of “One Market, One Tax”, it streamlines all the previous taxes into one leading to a uniform taxation system. GST aims at easing the process of carrying out a business in the country, forming a common market. It has replaced all the other taxes, including VAT, excise duty, service taxes, etc., into a common tax named GST. Whether it be a supply of goods and services within the city or across the borders, the supplier or the buyer has to pay the GST interstate or intrastate. 

  1. Benefits of GST
  2. Composition scheme under GST
  3. GST interstate vs intrastate supply meaning
  4. Example to explain the GST interstate vs intrastate supply meaning
  5. Conclusion

 

Benefits of GST

GST has led to the eradication of the cascading tax system, replacing it with one indirect tax. It serves the following benefits:

  • It is technology-driven, unlike the earlier methods when one had to fill the form and file the taxes manually. 
  • For GST, one can complete all the processes right from registration to the tax filing on the GST portal. 
  • One can even calculate the GST amount using the GST calculator online. 
  • The major benefit of GST is that it has a high threshold amount, i.e., a turnover of 40 lacs for the businesses. Businesses having lesser turnover need not register themselves for GST. This provides all the small and medium enterprises to flourish their business without worrying about tax payments. 

Composition scheme under GST

To reduce the burden of high taxes, the government introduced the composition scheme under GST.

  • Under this scheme, only the businesses having a turnover of over 1.5 crores can register. 
  • According to the composition scheme, the GST composition dealer has to pay taxes somewhere between 1-6% of their turnover.
  •  Along with this, instead of filing the GST every month, the government allows them to file it quarterly or annually. The GST composition dealer is not liable to pay the IGST tax and has to pay it under the reverse charge mechanism.
  • In case the reverse charge mechanism confuses the individual about the tax payment, one can use the GST calculator to calculate the amount for the GST composition dealer. They also have the benefit of not maintaining the accounts for the taxes. 
  • It restrains the GST composition dealer from issuing tax invoices. Instead, one has to issue the bill of supply.
Get Online GST Registration

GST interstate vs intrastate supply meaning

The GST interstate vs intrastate supply meaning is vital to understand the importance of IGST (Integrated Goods and Services Tax), CGST (Central Goods and Services Tax), and SGST (State Goods and Services Tax). 

In simple terms, interstate means between two states and intrastate means in between the state itself. 

GST Interstate: According to GST, when the supply of goods and services takes place across the borders of two states or union territories, it is called the interstate supply of GST. Under the interstate supply, one has to pay only the IGST, and not CGST or SGST. The GST interstate also includes the supplies made by the SEZ (Special Economic Zone).

GST Intrastate: The intrastate supply in GST is when the supply of goods and services takes place within the state. Under this, the individual has to pay both CGST and SGST. This does not mean that there is an increase in the tax. Rather, it is equal to IGST and is just divided equally in the name of CGST and SGST. In the intrastate supply in GST, both the supplier and buyer belong to the same state. 

Example to explain the GST interstate vs intrastate supply meaning

Consider a situation:

If an electronic store based in Chennai, Tamil Nadu sells an AC worth ₹1,20,000, to another store in Mumbai, Maharashtra, they have to pay a tax of ₹21,600 as IGST. However, if the same store sells the AC to another store in Madurai, then they have to pay a tax of ₹10,800 as CGST and ₹10,800 as SGST, the total amount remains the same. This is the easiest example for the intrastate supply in GST and interstate supply, and the tax amount that has to be paid. 

Conclusion

The GST is one of the best tax reforms in Indian history, with several benefits in the short-term and long-term. In case you have any issues to calculate the GST amount, you can easily do so by using the GST calculator according to the tax rates and supply. 

 

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