Difference Between Interstate and Intrastate in GST

What is Interstate Supply in GST?

An interstate supply occurs when the supplier’s location and the place of supply fall in different states or Union Territories. Section 7 of the IGST Act, 2017, treats such supplies as interstate supplies, on which the supplier generally charges IGST.

The law also specifically treats imports and supplies to or by SEZ units or developers as interstate supplies. Exports are zero-rated supplies, while supplies to or by SEZ units or developers are also zero-rated under the IGST framework.

Some features of interstate supply are:

• Different locations: The supplier’s location and place of supply fall in different states or UTs.
• IGST: The supplier charges IGST instead of charging CGST and SGST/UTGST separately.
• SEZ supplies: Supplies to or by an SEZ unit or developer qualify as interstate supplies even when both parties are in the same state.
• Imports: Imported goods and services fall within the interstate-supply framework under Section 7.
• ITC: A registered recipient can claim eligible IGST credit and use it according to the prescribed utilisation rules.
• Registration: Businesses must check the applicable registration provisions and exemptions rather than assuming that every interstate supply requires immediate GST registration.

What is Intra-State Supply in GST?

An intra-state supply occurs when the supplier’s location and the place of supply fall in the same state or Union Territory. Section 8 of the IGST Act governs these supplies. Businesses generally charge CGST and SGST, or CGST and UTGST where UTGST applies.

Key features of intra-state supply are:

• ITC restrictions: Businesses cannot use CGST credit to pay SGST/UTGST liability, or SGST/UTGST credit to pay CGST liability.
• Same location: The supplier’s location and place of supply fall in the same state or UT.
• Dual tax: The supplier charges CGST along with SGST or UTGST.
• Separate collection: The Centre collects CGST, while the state or UT collects SGST or UTGST.
• SEZ exception: The law does not treat supplies to or by an SEZ unit or developer as intra-state supplies, even when both parties operate in the same state.
• Registration threshold: Businesses generally obtain GST registration after crossing the applicable turnover threshold, subject to compulsory registration provisions and exemptions. For example, the general threshold for exclusive suppliers of goods can be ₹40 lakh, subject to state-specific conditions.
• ITC restrictions: Businesses cannot use CGST credit to pay SGST/UTGST liability, or SGST/UTGST credit to pay CGST liability.

Note: In UTs without a legislature, such as Chandigarh, Ladakh, Lakshadweep, and Andaman & Nicobar Islands, UTGST replaces SGST and is charged alongside CGST.

Difference Between Interstate and Intrastate GST

The table below compares interstate and intrastate supplies under the GST regime.

Basis	Interstate Supply	Intrastate Supply
Meaning	The supplier provides goods or services from one state or Union Territory to another. The supplier’s location and the place of supply are in different states or UTs.	The supplier provides goods or services within the same state or Union Territory. The supplier’s location and the place of supply are in the same state or UT.
Governing law	Section 7 of the IGST Act, 2017	Section 8 of the IGST Act, 2017
Tax levied	Integrated GST (IGST)	Central GST (CGST) and State GST (SGST), or CGST and Union Territory GST (UTGST)
Tax collection	The Central Government collects IGST and transfers the destination state’s share to the consuming state or UT.	The Central Government collects CGST, while the respective state or UT collects SGST or UTGST.
Tax rate	The supplier charges the full GST rate as IGST.	The supplier splits the same GST rate equally between CGST and SGST/UTGST.
Place of supply	The place of supply is in a different state or UT from the supplier’s location.	The place of supply is in the same state or UT as the supplier’s location.
Invoice	The supplier shows IGST as a separate line item on the tax invoice.	The supplier shows CGST and SGST/UTGST as separate line items on the tax invoice.
GST registration	Businesses making interstate taxable supplies of goods generally must register regardless of turnover, unless exempt. For services, the normal turnover threshold generally applies unless compulsory registration provisions apply.	Businesses generally register only after crossing the prescribed turnover threshold. However, some persons must register regardless of turnover under Section 24 of the CGST Act.
Impact on GST registration	Businesses expanding into other states generally need a separate GST registration in each state from which they make taxable supplies. Interstate supplies may also trigger compulsory registration in certain cases.	Businesses operating only within one state usually need only one GST registration for that state, unless they have multiple business establishments requiring separate registrations.
Input Tax Credit (ITC)	Businesses must use IGST credit first to pay IGST, then CGST, and then SGST/UTGST, subject to the GST utilisation rules.	Businesses must use the CGST credit first for CGST and then for IGST. They must use SGST/UTGST credit first for SGST/UTGST and then IGST. They cannot use CGST credit to pay SGST/UTGST or vice versa.
GST returns	The supplier reports interstate supplies and IGST liability in GSTR-1 and GSTR-3B. Interstate B2B transactions also appear in the recipient’s GSTR-2B for ITC claims.	The supplier reports intrastate supplies, CGST, and SGST/UTGST liability in GSTR-1 and GSTR-3B. Eligible recipients can claim ITC through GSTR-2B.
Compliance obligations	The supplier must correctly determine the place of supply, charge IGST, issue a GST-compliant invoice, maintain records, file returns on time, and pay tax within the due dates.	The supplier must correctly determine the place of supply, charge CGST and SGST/UTGST, issue a GST-compliant invoice, maintain records, file returns on time, and pay tax within the due dates.
Revenue distribution	The destination state ultimately receives its share of the tax.	The Centre retains CGST, while the originating state or UT retains SGST or UTGST.
Common examples	A business supplies goods from Delhi to Haryana, imports goods into India, or supplies goods or services to or by an SEZ.	A business supplies goods from Jaipur to Udaipur or from Chennai to Coimbatore within the same state.

How to Determine Interstate vs Intrastate in GST?

Follow these steps to determine whether a supply is interstate or intrastate:

1. Identify the supplier’s location. This is usually the supplier’s registered place of business under GST.
2. Determine the place of supply. For goods, this is generally where the movement of goods ends for delivery. For services, it is usually the recipient’s location if the recipient is registered, though special place of supply rules apply to certain transactions.
3. Compare both locations. If the supplier’s location and the place of supply are in the same state or Union Territory, the supply is intrastate and attracts CGST and SGST/UTGST. If they are in different states or Union Territories, the supply is interstate and attracts IGST.
4. Check for special cases. Some transactions always qualify as interstate supplies, regardless of the supplier’s and recipient’s locations. These include imports, exports, and supplies to or by Special Economic Zones (SEZs).

Tip: The first two digits of a GSTIN represent the state code. Compare this code with the state of the place of supply to quickly identify the applicable GST.

GST 2.0 and Its Impact on Interstate and Intrastate GST

The 56th GST Council introduced a major overhaul of the GST rate structure, commonly referred to as GST 2.0. The revised rates took effect on 22 September 2025 for most goods and services. The reforms aim to simplify GST, improve compliance, and reduce the tax burden on essential goods and services.

However, it does not change the rules for classifying supplies. Businesses must continue to determine whether a supply is interstate or intrastate based on the supplier’s location and the place of supply under the IGST Act.

• For an interstate supply, businesses charge the applicable GST rate as IGST.
• For an intrastate supply, businesses split the same GST rate equally between CGST and SGST or UTGST.

For example, if a transaction attracts 18% GST, the supplier charges 18% IGST on an interstate supply or 9% CGST + 9% SGST on an intrastate supply. The total tax remains the same. Only the tax collection and revenue-sharing mechanism changes.

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