Which GST is Applicable to Interstate Supply?

Goods and Services Tax (GST) is an indirect tax system in India that has replaced many other indirect taxes that were previously levied by the central and state governments. GST is applicable to various types of transactions, including intra-state supplies and inter-state supplies. However, the type of GST applicable to these supplies differs, and it is essential to understand the GST that is applicable to inter-state supplies. In this article, we will delve into the various aspects of GST applicable to inter-state supplies and answer some frequently asked questions.

Understanding Inter-State Supply

An inter-state supply refers to the supply of goods or services from one state to another state. For instance, if a supplier in Tamil Nadu sells goods to a buyer in Karnataka, it is considered an inter-state supply. Similarly, if a supplier in Karnataka provides services to a client in Maharashtra, it is an inter-state supply.

Applicable GST for Inter-State Supply

The type of GST applicable to inter-state supplies is Integrated GST (IGST). IGST is a combination of central GST and state GST, and it is levied by the central government on inter-state supplies of goods and services. The tax collected under IGST is distributed between the central government and the state governments where the goods or services are consumed.

When to Charge IGST on Inter-State Supplies

If you are a supplier providing goods or services across state borders, you must charge IGST on the supply. IGST must be charged when the transaction is an inter-state supply of goods or services. It is important to note that IGST is charged only when the transaction is between two different states or union territories. If the transaction occurs within the same state, the applicable GST will be central GST and state GST.

Calculation of IGST

Calculating IGST involves adding the central GST and state GST components. The rate of IGST is the same as the sum of the central GST and state GST rates. For instance, if the central GST rate is 6% and the state GST rate is 6%, the applicable IGST rate will be 12%.

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Claiming IGST Credit

If you are a supplier paying IGST on inter-state supplies, you can claim IGST credit against the IGST liability. The IGST credit can be used to offset the IGST payable on future inter-state supplies. You can also claim IGST credit against the central GST and state GST liabilities.

Conclusion

GST is a complex tax system, and it is crucial to understand the applicable GST for different types of transactions. For inter-state supplies, IGST is applicable, which is a combination of central GST and state GST. Understanding the nuances of GST can help businesses avoid errors and comply with the applicable laws.

FAQs

Q1. What is the difference between SGST, CGST, and IGST?

SGST is state GST, and CGST is central GST, which is levied on intra-state supplies. IGST is a combination of central GST and state GST, which is levied on inter-state supplies.

Q2. What is the rate of IGST?

The rate of IGST is the sum of the central GST and state GST rates.

Q3. Can IGST credit be claimed against central GST and state GST liabilities?

Yes, IGST credit can be claimed against central GST and state GST liabilities.

Q4. What is the penalty for non-payment of IGST?

The penalty for non-payment of IGST is 10% of the tax due or a minimum of Rs. 10,000.

Q5. Can IGST be refunded?

Yes, IGST can be refunded in certain cases, such as exports or supplies to SEZ units.