Inter-State Supply in GST: Key Differences Between Interstate and Intrastate GST

Have you ever wondered what happens to your goods when they cross state borders? Does GST vary when your business makes an order from Maharashtra to Gujarat or from Delhi to Tamil Nadu? That’s where interstate supply in GST comes in.

As GST reforms keep on changing in India, it is important to note the distinction between interstate and intrastate GST for businesses, accountants, freelancers and all the stakeholders involved. 

In this blog, we are going to discuss what interstate supply means under the GST, how it works and what you need to do to remain compliant, all in layman’s terms. 

What Is Interstate Supply in GST?

Let's start with the basics.

Inter-state supply refers to any supply of goods or services under which the place of supply and the location of the supplier are in different states or Union Territories.

For instance:

When your business in Mumbai (Maharashtra) sells goods to a consumer in Bengaluru (Karnataka), then this purchase will be an interstate supply.

In the law of GST, such supplies are subject to Integrated GST (IGST) to be collected by the Central Government.

Does that make sense? 

To put it simply, in the process of moving goods or services across states, you pay IGST, not CGST and SGST.

GST Rules for Inter-State Supply in 2025

As of October 2025, there are a few updates and reminders worth noting:

Mandatory GST Registration:

GST registration is mandatory if you are making taxable interstate GST supplies, irrespective of your turnover. Small business owners often neglect GST registration due to the intention of tax evasion, but this is a grave mistake.

E-Way Bill Requirement:

Any interstate movement of goods exceeding ₹50,000 requires an E-Way Bill. It helps track goods movement and prevents tax evasion.

Inter-State Supply Through E-Commerce:

If you sell through platforms like Amazon, Flipkart, or Meesho and ship products to another state, those are interstate supplies too. The portal will collect TCS (Tax Collected at Source) on such transactions.

Exports and SEZ Supplies:

These are treated as inter-state supplies but are zero-rated, meaning you can claim refunds on the IGST paid.

Reverse Charge Mechanism (RCM):

Certain inter-state supplies, like those received from unregistered persons, fall under the reverse charge mechanism. You, as the recipient, pay the tax directly.

Examples of Inter-State Supply in GST

Interstate Goods Movement:

A Surat textile developer sells sarees to a Jaipur boutique. The buyer and supplier are in different states, in Gujarat and Rajasthan, respectively, hence it is an inter-state supply.

Service Between States:

One of the digital marketing agencies in Delhi has a client in Chennai. IGST is levied since the laws in both states are not the same.

Import/Export Within the Company:

GST also considers imports and exports as inter-state supplies, although one of the parties may be outside India. In the case of importing machinery from Germany, IGST is applicable. 

Supply to SEZ ( Special Economic Zone):

In the case of supplying goods or services to an SEZ unit, it is regarded as an inter-state supply, regardless of whether it is within the same state or not.

Difference Between Interstate vs Intrastate GST

Basis	Inter State Supply	Intra State Supply
Meaning	Supplier and buyer are in different states or UTs	Supplier and buyer are in the same state
Tax Type	IGST	CGST + SGST
Collected By	Central Government	Central and State Governments
Example	Seller in Maharashtra → Buyer in Gujarat	Seller and Buyer both in Delhi
Invoice Format	IGST mentioned separately	CGST and SGST shown separately

Common Mistakes Businesses Make in Inter-State Supplies 

The following are the common mistakes that businesses make when it comes to interstate supplies:

• Charging CGST+SGST instead of IGST for out-of-state sales.

• Not generating e-way bills for the interstate movement of goods.

• Failing to update the GST registration after opening a new branch in another state.

• Not claiming ITC properly on IGST paid.

• Using the wrong place of supply on invoices

Key Takeaways

Interstate = Supply between different states → IGST

Intrastate = Supply within the same state → CGST + SGST

Exports/Imports = Treated as interstate supplies.

Supplies to SEZ = Interstate, but zero-rated

If you remember these four points, you’ll rarely go wrong.

Over To You

Since you are now aware of what interstate supply in GST means, spend a few minutes reviewing your invoices and GST filings. Do you correctly use IGST on out-of-state sales? If not, now's the time to fix it. As the GST compliance in India is tightening every year, it is no longer optional, but rather a necessity that demands precision.

You still have questions on how to go about interstate supplies, file returns, or balancing data? Munim GST Return Filing Software aids you in GST filing and assists you in remaining compliant without the huddles.

FAQs

Is an e-way bill mandatory for interstate supply​?

Yes, an e-way bill is required for all interstate movement of goods worth more than ₹50,000.

Can a composition dealer make an interstate supply​?

No, a composition dealer will not be able to make interstate supplies. The GST Composition scheme is intended to be used in intra-state transactions.

Can an unregistered supplier make an interstate supply​?

No, an unregistered supplier is not able to make interstate supplies.

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