Types of GST for goods moving between borders
Supply of goods which are transported across state borders can be classified as an interstate supply of goods. Accordingly, IGST will be applied.
Why IGST?
Goods and Services Tax is collected by the government and distributed between the state and the central governments.
The basis of allocation depends on the type of supply of goods. In order to determine the type of supply, it is important to know the place of supply and type of supply of a specific transaction.
Section 10 of IGST Act, deals with the place of supply of goods under GST. Place of supply helps identify whether a transaction is inter-state or intra-state supply.
Interstate supply
As per section 7 of IGST Act, subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply are in-
- two different States.
- two different Union territories; or
- a State and a Union territory
shall be treated as interstate supply of goods.
Intrastate supply
As per section 8 of IGST Act, Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of goods are in
- the same State or
- same Union territory
shall be treated as intra-State supply
Therefore, the type GST to be charged on a specific transaction will be decided based on the following:
| Type of supply | Type of GST |
|---|---|
| Interstate supply | IGST |
| Intrastate supply | CGST and SGST (in equal proportions) |
Conclusion
In the given case, goods are transported across state borders, which means the place of supply of goods and the location of supplier are not within the same state. This satisfies the definition of interstate supply.
Hence, in this case, IGST will be charged.
Additional points:
- IGST – Integrated Goods and Services Tax
- CGST – Central Goods and Service Tax
- SGST – State Goods and Services Tax
- IGST will be collected by the central government and later it will be shared between the central and the destination state governments.