Inter State sale will be governed by IGST (Integrated Goods and Services Tax) Act, 2017. Integrated Goods and Service Tax (IGST) is the sum of CGST and SGST which will get imposed on the goods and services in Inter State Supply. It is destination based and will accrue to the importing state. In simple words, we can say IGST is the combined tax imposed other than CGST and SGST. If the rate of SGST is 12% and the CGST is 15% then the rate of the IGST will be 27%.
Inter State sale – Impact
GST has two components :
- CGST – Revenue will go to the Central Government.
- SGST – Revenue will go to the State Government.
Example of Inter State sale
Tax rate of CGST and SGST are 15% and 12% respectively.
Anil, a Chennai registered trader, sold goods to Dev, a Mumbai registered trader, for Rs. 10 Lakhs and further Dev sold the goods to Bharat, a Delhi registered retailer, for Rs. 11 Lakhs.
Firstly, Anil sold the goods to Dev
- Anil willl collect IGST at the CGST+SGST rate on Rs. 10 Lakhs.
- Dev will get the credit which he can use for further payment of his GST. This credit will be given after the payment of IGST to Anil on Rs. 10 Lakhs.
Secondly, Dev sold the goods to Bharat
- Dev will collect IGST at the CGST+SGST rate on Rs. 11 Lakhs.
- Bharat will get the credit which he can use for further payment of his GST. This credit will be given after the payment of the IGST to Dev on Rs. 11 Lakhs.
So Finally, Maharashtra will get the SGST on Rs. 10 Lakhs from Chennai on the first transaction between Anil and Dev. Maharashtra will also be collecting tax on the second transaction between Dev and Bharat on the amount of Rs. 11 Lakhs which it will further transfer to the Central Government (CGST) and to the Delhi government (SGST).
Delhi will get the SGST on the amount of Rs. 11 Lakhs from the transaction between Dev and Bharat.
Hence, Inter State sale will benefit as the transactions do not have to be taxed twice. This is in contrast to present taxation regime where if you purchased goods from Mumbai you pay tax there and then again in your state in which you ultimately sell it. These will help the traders to increase their Inter State sale by lowering tax burden.
In case you are confused about GST as a business owner, feel free to consult the GST experts at LegalRaasta. You can get comprehensive assistance on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.