In general, most supplies made to customers located interstate are GST-free. There are, however, certain exceptions to this rule. If a supplier does not know where their customer is located at the time of making the supply or if they think that the customer is overseas and you do not have evidence of their location, then the GST-free status of your interstate supply may be affected.
Which Gst Applies To Interstate Supply? According to groww., GST tax is levied when there is an interstate transfer of goods & services. Persons providing inter-state services are excluded from GST enrollment up to a turnover limit of Rs. 20 lakhs (Rs. 10 Lakhs in particular states).
What is IGST?
Interstate supply transfers goods and services between two or more states. It can be either the transport of goods within a state or the transport of goods across state lines. Interstate supply also refers to the legal procedure to transfer goods and services between one form and another. State laws determine which businesses allow offering interstate supply services.
GST applies to interstate supply in two ways. First, GST applies to all collections of tangible personal property made by someone in one state in another state. Second, GST applies to all supplies made from one state to another state. If a business makes an interstate supply, it must charge and collect GST on that supply.
The rules for interstate supply are different from the rules for intrastate supply, in which supplies make within a single state. While some provinces have taxes for intrastate supplies, there is no federal sales tax. In addition, there are no laws requiring intrastate businesses to collect provincial sales tax on their intrastate sales unless they sell to another province or territory requiring such tax collection.
Meaning of Inter-State Supply:
As per GST Act, inter-state force is when the supplier’s position and place of force are in different countries. In simple words, inter-state force means supplying goods or/ and services from one state border to another. In the case of inter-state inventories, the taxpayer is liable to pay the Integrated Goods and Services Tax( IGST) collected by the Central Government. Illustration of Inter-state force of raw material from Punjab to Delhi.
GST applies to interstate supplies:
The GST applies to all supplies your business makes if you are an Australian business. It includes:
- Supplies made to customers in Australia or overseas
- Supplies of goods or services delivered through the mail or post (delivered by another person)
- Supplies made to other businesses for resupply (like a wholesaler)
- Supplies of real property (including land) made for sale or lease
- Supplies of food, beverages, or entertainment
How do you know if the supply is interstate?
A supply is interstate if the customer is in another state. Supply make to a post office box or a place of business in another state. If a company has a supplier in another state and makes the sale to an end user in that same state, it is not interstate commerce. A company can be involved in interstate commerce even if it is based in one state and supplies merchandise to its store in another. For example, if a company based in Texas supplies inventory to its store in California, this would be intrastate commerce because of the two states involved. If a company provides merchandise to its store in California and the customer is from Texas, this is interstate commerce because Texas is engaged.
What if the customer is overseas or unknown?
You must apply the GST rate to your supplier if the customer is overseas or unknown. If the customer is a GST-registered person, it doesn’t matter whether they are overseas or unknown: you still have to apply the GST rate for your supplier. If the customer is GST-registered and overseas, you need to apply the GST rate for your supplier & the customer is GST-registered, but unknown, you don’t have to use the GST rate for your supplier.
Is it a taxable supply?
The GST Act applies to most goods and services provided in Australia. After 1 July 2000 and before 15 March 2001, a taxable supply of any supply made.
A taxable supply includes:
- Any financial service except a financial supply that is exempt by law;
- Exports;
- Health services (health insurance premiums only);
- Education services provided by private schools;
- Provision of land, buildings, or premises; Other than money, the condition of personal property; Services provided by a non-GST registered provider; and Supplies made outside of Australia
You have to apply the correct GST rate for your supplier:
Your supplier will have to pay the proper amount of GST to the ATO. You must charge GST on all goods and services you provide. The rate of GST depends on the type of product or service and whether you’re supplying it to an Australian business or a consumer. You may be able to claim a GST credit on your purchases and expenses if they relate directly to your business activities.
Conclusion:
In conclusion, we can say that a supply makes when goods deliver interstate. It makes no difference if the items are sent from one state to another or from a different region of the same state. The only thing that matters is where the goods will take by their recipient once they arrive at their destination!
FAQ & Related Questions :
Here is some related question about Which GST applies to interstate supply? Let’s have a look.
1. What is the purpose of IGST?
It would keep the Input Tax Credit (hereafter referred to as “ITC”) chain in interstate supply intact.
2. How do I track its refund status?
You can track refund status through an online portal.
3. Who is subject to the IGST tax?
The IGST tax will govern the IGST. A GST tax is levied on all interstate supplies of goods or services. Guest impose on any supply of products or services in both cases of import into India and export from India.
4. Are GST & IGST are same ?
The primary distinction between GST & IGST is a percentage of income tax that must pay to be deducted when a profit & loss is earned in the sale of goods & services, IGST on the other hand; it is a sort of GST that must be paid by the supplier in the case of an interstates supply of goods & service.
5. When the IGST act establish?
The act is known as the integrated goods & services tax act 2017& it was passed to command, collect & distribute IGST in India. Furthermore, SGST is an abbreviation for state goods & services tax.