Place of Supply and Tax Liability in Intra-State Transactions: CGST, SGST, GST Rate and Compliance

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Published Date:  12-02-2024   Author:   eva-mukherjee
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Introduction

The government of India introduced GST (Goods and Services Tax) on the 1st of July in 2017. GST has two components intrastate transactions and interstate transactions. These two components determine whether the involved parties should pay SGST, CGST, or IGST. Whether a supply is intrastate or interstate depends on the supply place and the supplier’s location. In this blog post, we will discuss the GST rate and compliance in the intra-state supply of goods.

Place of Supply in Intrastate Transactions

Intrastate supply of goods occurs when the supplier of goods and services and the supply place are within the same state. Accordingly, intrastate supply tax liability consists of both CGST and SGST. Here, CGST is the acronym for Central Goods and Services Tax and the Central Government levies it. In contrast, SGST is the short form of State Goods and Services Tax, which is levied under the State Government. 

Table to Highlight Intrastate Supply Tax Liability

The tax liability determination in the intrastate supply of goods and services in tabulated form is as follows –

GST Type Levied By 
CGST Central Government
SGST State Government 
UTGST Union Territory Government

 

Also Read: Determining Place Of Supply In Intra-State Transactions General Principles

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How the Combination of CGST and SGST or UTGST Works for Intrastate Transactions 

If you want to enhance your knowledge related to GST impact on intrastate transactions, you should know the diverse aspects of the applicable GSTs as follows-

Central Goods and Services Tax and its Applicability

Central Goods and Services Tax refers to a tax levied on both intrastate supplies of services and goods by the Indian Central Government for the coffers. Here, the CGST Act and its provisions govern the collection and levy of CGST. Furthermore, the provisions of taxation in intra-state transactions may undergo certain amendments with time.  

The same intrastate supply also levies an equal value of SGST combined with CGST. However, the specific state government will become the governing authority to charge the value of SGST. In simple words, if an individual supplies a product to another individual within the same state, the combined CGST and SGST compliance will apply. Here, both the state and the central governments agree to combine their levies with a suitable proportion to share the obtained revenue between them. 

State Goods and Services Tax and its Applicability 

The provisions related to GST rates in intrastate transactions mandate the applicability of SGST as well. The government of the respective Indian state, where the transaction of goods/services occurs has the right to levy State Goods and Services Tax on intrastate supplies of tangible goods and intangible services. Here, the specific state’s SGST Act governs the collection and levy of SGST and it also undergoes amendment regularly. 

The main purpose of introducing SGST is to merge all other state taxes operating in the past. These include entertainment tax, value-added tax, entry tax, luxury tax, and lots more. However, as discussed before, CGST and SGST in intrastate supplies are applicable for the involved transactions. However, the Central Government will govern the CGST tax in intrastate supply. 

Also Read: What Are The GST Rates That Apply To Intra-State Supplies?

Example to Explain the Application of CGST and SGST in Intrastate Supplies 

The current GST rate for every type of movable goods should be up to 18%. Accordingly, if the movement of goods takes place within the state only, say in MP (Madhya Pradesh), the intrastate tax bifurcation will be as follows –

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Total GST Rate  CGST Rate SGST Rate 
18% (Combination of CGST rate and SGST rate) 9% levied by the Central Government of India 9% levied by the Madhya Pradesh Government

Note –

Every tax liability obtained under CGST should be set off against only CGST input tax credit and vice versa. 

UTGST and its Applicability in Intrastate Transactions 

UTGST is the short form of the Union Territory Goods and Services. It is like SGST levied by the Indian state governments for intrastate transactions. However, the difference is that UTGST levies are in the hands of the Union Territory governments. It implies the tax levied on an intra-Union Territory transfer of various goods and services and UTGST Act is its governing body. Furthermore, whenever a transaction takes place in a union territory of India, the tax is levied for combined UTGST and CGST.

Note –

UTGST is applicable only for the transaction of goods or services in the following Union Territories of India-

  • Andaman and Nicobar Islands
  • Chandigarh
  • Dadra and Nagar Haveli with Daman and Diu
  • Jammu and Kashmir 
  • Ladakh 
  • Lakshadweep

However, the union territories of Puducherry and Delhi come under SGST law only, as they possess their separate legislature. 

Conclusion

India is one of the federal nations where the states and the Center possess the powers to collect and levy taxes according to the Constitution. Both governments have different responsibilities to increase the overall tax revenue as Goods and Services Tax. Hence, the Central Government and the specific state governments or union territories are levying GST simultaneously. 

Therefore, the 3-type GST structure has proved to be a boon for taxpayers to gain credit against one another to provide One Tax for One Nation.

Also Read: How Is The Place Of Supply Determined For Intra-State Supplies?

Frequently Asked Questions 

  • What are the types of GSTs applicable in intrastate transactions?

Intrastate supply involves the application of both CGST and SGST types of GST levied by the Central and the State Governments respectively.  

  • Whether GST rate is the same for both the supply of goods and services in intrastate transactions?

Yes, the GST rate is the same for both intrastate supply of goods and services. However, the rate and the tax amount must be divided equally into CGST and SGST heads. 

  • What refers to compliance with GST for the transaction of goods/services?

The GST Council in India has set up certain rules for the methods to maintain transaction records, raise invoices, and report the sales or purchases made. Accordingly, the involved parties pay their taxes and file returns. In other words, GST compliance refers to adherence to the necessary rules and regulations created under the latest GST Act of India.    

  • How does the supply place determine the GST computations and its payments?

The GST computations and their payments have close tie-ups with the supply place, as it sets up the taxation jurisdiction for the respective transaction and the applicable rate of GST.

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Eva Mukherjee

Eva has expertise in writing content in diverse niches, including the latest rules and norms related to CGST Act, Stock Market and Shares.

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