Supplies under GST: GST is also known as Goods and Services Tax is an indirect tax (or consumption tax) used in India on the supply of goods and services which is laid by the Indian government on even daily necessities. This tax was introduced on 1 July 2017. It is a broad, multistage, station-based tax, broad because it has included all indirect taxes except a few like electricity, petroleum, and alcohol are not taxed under GST and are taxed separately by their state governments, as per the previous tax system.

Goods and services tax is divided into five different tax slabs for collection of tax as follows-

  • 0%
  • 5%
  • 12%
  • 18%
  • 28%

The GST council governs tax rates, rules, and regulations. The GST council consists of the finance ministers of the central government and all 29 states. The GST is meant to displace a large number of indirect taxes with an integrated tax and it is therefore expected to remold our country’s 2.4 trillion dollar economy. The GST replaced the existing numerous taxes levied by the central and state governments. The implementation of GST has gained a lot of criticism as the middle class and economically weaker section were highly affected by the implementation of GST as the tax was also applied on necessities even like milk, bread, and butter even. It was also applied on sanitary napkins but by the great efforts of Akhil Bhartiya Vidyarthi Parishad the tax imposed on them had been removed.

 Inter-state supply

  • Inter-state supply occurs when the transportation of goods and services takes place from one state to another, under GST.
  • The GST Act specifies domestic supply as when the supplier can supply between:
  • Shipment between a state and a union territory
  • Shipment between two regions or states in a single union territory
  • Further, the supply of goods transported to India is also sometimes known as an inter-state supply before they reach the customs station.
  • Transportation of goods and services are known as inter-state supplies from or to a particular development zone or an exclusive economic zone.
  • It also makes sure that the trade would become an inter-state supply if the supplier and the delivery place are in separate countries.
  • For example – if a supplier owns a company namely ABC in the State of Uttar Pradesh and the supplier wants to supply products to Company XYZ Madhya Pradesh, then it would get categorized under the inter-state supply.

Intra-state supply

  • Intra-state supply occurs when the transportation of goods and services takes place in the same state or area of the Country, under GST.
  • The distribution of goods or services, intra-State is when the supplier‘s position and place and the buyer’s location, are the same.
  • In intra-State transactions, a seller must obtain both Central Goods and Services Tax (CGST) and State Goods & Services Tax (SGST) from the buyer.
  • The Central Goods and Services Tax (CGST) is deposited with the central government and State Goods & Services Tax (SGST) is to be deposited with the state government.
  • For example – if a supplier owns a company namely EFG in Karnataka, Bengaluru, and has to supply goods in Mysore then it gets categorized under inter-state supply.
  • This specifies that, if the supplier‘s position and the buyer’s position are within the same State then supply is an intra-State supply.
BasisInter-stateIntra-state
SUPPLYwhen the supply of goods and services takes place across the area of two states or union territories, it is called the inter-state supply of GSTwhen the supply of goods and services takes place in the state.
TAXESIn the interstate supply, one has to pay only the IGST (Integrated Goods and Services Tax), and not CGST  (Central Goods and Services Tax )or SGST( State Goods & Services Tax).Under this, the individual has to pay both CGST( Central Goods and Services Tax ) and SGST( State Goods & Services Tax).

 

In this supply in GST, both the supplier and buyer don’t belong to the same state.In this supply in GST, both the supplier and buyer belong to the same state.

Taxes on Interstate vs. Intrastate Supply

  • Integrated Goods and Services Tax (IGST) is attracted by inter-state supply.
  • CGST (Central Goods and Services Tax ) and the State Goods and Services Tax (SGST) are applied on an intra-state supply.
  • The rate of GST will remain the same for all the goods or services, for intrastate supply.
  • The IGST (Integrated Goods and Services Tax) rate will be equal to the CGST(Central Goods and Services Tax ) plus SGST (State Goods and Services Tax) rate.
  • The GST and tax rate are further split into two headings equally: SGST (Central Goods and Services Tax ) and CGST(Central Goods and Services Tax ).
  • In the situation of the interstate supply of goods and services, the Central government deposits integrated Goods and Services Tax (IGST). CGST(Central Goods and Services Tax ) and SGST(Central Goods and Services Tax )  will not be charged in this case.
  • Taxes are laid on different goods or services depending on the supply location, under GST for example-alcohol, petroleum, and electricity.
  • In an intra-state supply of goods and services, the Central Goods and Services Tax (CGST) is collected by the Center of Commerce, and the State Goods and Services Tax (SGST) is received by the State where the supply takes place.

Why should tax be differentiated in supply?

  • There are four kinds of taxes imposed on goods and services which are: CGST (Central Goods and Services Tax), IGST (Integrated Goods and Services Tax), UGST (Union Territory Goods & Services Tax), SGST (State Goods and Services Tax).
  • In an Intra-state supply, CGST(Central Goods and Services Tax) and SGST (State Goods and Services Tax) is payable only while IGST (Integrated Goods and Services Tax) is chargeable and payable in international supply only.

Conclusion

The GST is one of the best tax amendments ever done in Indian history, with several benefits as well as disadvantages in the short-term and long-term. If a person has any issues in the calculation of the GST amount, then he can easily do so by using the GST calculator according to the tax rates and supply.

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Inverted duty structure: What is an inverted duty structure under GST?
GST State Code List and Jurisdiction
GST Offline Tool Services in India