CHAPTER – 4

INTER-STATE AND INTRA-STATE TRANSACTIONS UNDER GST

(Place of Supply)
Introduction :
In order to levy of taxes under GST, to identify the nature of supply. Nature of supply means
supply of goods or service or both may be levied tax under GST.
Nature of supply may be divided into two factors
Inter-state supply
TAX= IGST
Nature of supply

Intra-state supply
TAX = CGST+SGXT
INTER-STATE AND INTRA-STATE TRANSACTIONS UNDER GST
Inter-state and intra-state transactions under GST the determination of nature of supply
may be divided into 3 types :
I. Inter-state supply of goods and services – sec 7 of IGST Act.
II. Intra -state supply of goods and services – sec 8 of IGST Act.
III. Supply of territorial waters – section 9 of IGST Act.

1. What is Inter-state supply of goods and services ?

A. Under sec 7 of the IGST Act the following are considered as inter-state supply. The
following provisions may be regarding for inter-state supply :
a) Inter-state supply of goods [section 7(1)]
Supply of goods in the course of inter-state trade or commerce, inter-state supply means
where the location of the supplier and place of supply are in two different states.
b) Import of goods [section 7(2)]
Sec 7(2) of the IGST Act provides that goods are imported from outside India, the IGST
will be charged.
c) Inter-state supply of services [section 7(3)]
Supply of services in the course of inter-state trade or commerce inter-state supply of
service means any supply where the location of the supplier and place of supply of services
are in two different states.
d) Import of services [section 7(4)]
Sec 7(4) provides when the services may be imported from outside India and place of
supply in India, it shall be considered as a transaction for inter-state trade or commerce, the
IGST will be charged.
e) Inter-state supply of goods or services or both [section 7(5)]
Inter-state supply of goods or service or both may be chargeable for central GST and
State GST. The following contents may be chargeable for supply of goods and services :
i. Export and Import of intra-state supply of goods and services shall be treated
to be inter-state supply, IGST and CGST may be chargeable.
ii. Any SEZ units may provide any supply of goods and services is chargeable to
the GST Act.
iii. Supply which is not intra-state supply should be treated as a inter-state. The
IGST will be chargeable.

2. What is Intra-state supply of goods and services ?

A. Intra-state transactions under GST the transactions which are covered under intra-state
supply. The section makes the provisions in respect of supply of goods or service or both in
the course of intra-state trade or commerce. The following provisions may be regarding for
intra-state supply of goods and services :

a) Intra-state supply of goods [section 8(1)]

Supply of goods where the location of a supplier and place of supply may be both on the
same state.
b) Intra-state supply of services [section 8(2)]

Intra-state supply of service means when a location of supply of service and place of
service may be both on in the same state.
 SUPPLIES IN TERRITORIAL WATERS SECTION 9 OF IGST ACT 2017

Section 9 of the IGST Act provides supply of territorial waters, the supply of goods and
services by seaport between the 12 nautical miles from the baseline on the coast of India.
Any of supplies for territorial water, the IGST may be chargeable.

PLACE OF SUPPLY
The Central Government has notified separate act for levy of taxes for CGST and IGST,
every state government with notified for levy of taxes in SGST on supplies of goods and
services.
If when the supplier location of and place of supply of goods and services within the
same state, the CGST and SGST may be chargeable. In case of when a supplier location of
supply of goods and services and place of supply of goods and services for two different
states, the IGST will be chargeable.

3. Discuss the rules regarding determining the place of supply ?

A. Place of Supply

I.Place of supply II.Place of supply III.Special provisions for supply of

of goods of services online information & database access

Supply within Exports & Services in Services in Section 14 of

India sec 10, Imports of India sec 12 Exports and IGST Act, 2017
IGST supply of goods Imports sec 13
sec 11, IGST

I. PLACE OF SUPPLY OF GOODS

The place of supply of goods determine as to which place shall be considered as place of
supply for chargeable of taxes under GST. Place of supply of goods may be further divided
into two types :

A. When a supply of goods is within India (Section 10, IGST Act 2017)

The following provisions may be regarding as follows :

a) Place of supply is where movement of goods terminated – Section 10(1)

Where the goods are required to be transfer from one place to another place the place of
supply shall be the place where movement of goods terminated in case of IGST may be
chargeable it should be treated as inter-state supply.

b) Goods delivered on the direction of the third person – Section 10(2)

In such case if the goods are delivered to any person as per the provisions of the act,
when the goods have been delivered on the direction of third person the place of supply will
be location of third person.
c) Where supply doesot involve movement of goods – Section 10(3)

Where the supply does not involve movement of goods the supplier and the place of
supply shall be the location of such goods at the time of the delivery to the consumed.
d) Where the goods are assembled or installed at a site – Section 10(4)

When the goods are assembled or installation at a site the place of supply of such goods
shall be chargeable to the GST.

e) Where the goods are supplied on road conveyance – Section 10(5)

When goods are supplied by road transportation or railway transportation or water

transportation and air transportation, the transportation charges may be included in the
supply of goods and services, IGST may be chargeable.
f) Supply other than above points – Section 10(6)

If the place of supply cannot be determined from sec 10(1) to sec 10(5), it shall be
determined prescribed by Central Government on recommendation of GST council.

B. Place of supply for exports & imports of goods (Section 11, IGST Act 2017)

Sec 11 of IGST Act 2017, provides for determination of place of supply of goods imported
and exported from India, the exports and imports of goods may be chargeable to the IGST.

II. PLACE OF SUPPLY OF SERVICE

Place of supply of service further divided into two types :

A. When supply of service is within India – Section 12 of IGST Act 2017

Sec 12 of IGST act 2017 provides for determination of place of supply of services, when
the location of a supplier of service and the place of supply of service may be both are in
India. The following provisions may be regarding in the place of supply of service.
a) Supply of registered person – Section 12(1)

IGST Act provides the place of supply of service made to a registered person; the
registered person is taxable on supply of services.

b) Supply to non-registered person – Section 12(2)

Supply has been made to a person who is unregistered the place of supply of service may
be chargeable to IGST Act 2017.

c) Place of supply for services covered under sec 12(3) & sec 12(4) of IGST Act, 2017

The services which are mentioned under section 12(3) and section 12(4), the place of
supply of services shall be chargeable under this act.

B. Place of supply for exports & imports of services – Section 13 of IGST Act, 2017

Where the location of the supplier of services for exports and imports of services is
outside India, then the place of supply shall be chargeable under this act.

III. SPECIAL PROVISIONS FOR SUPPLY OF ONLINE INFORMANTION AND DATABASE

ACCESS – Section 14 of IGST Act, 2017

As per sec 14 of the IGST Act, 2017 provides supply of online information and database
access, services may be delivered by Information Technology over the internet and the
nature of which renders their supply of goods and services may be chargeable in this act.

4. Explain the rules for determination of time of supply of goods under GST ?
A. Incidence of Tax : It means when the liability to pay tax arises. In simple words, incidence
of tax means ‘tax liability’.
Every statute is required to determine the time when the incidence of tax may be arise, sec 3 of
Central Excise Act provides tax is payable on manufacturing goods. Thus incidence of tax arise on
the day process of manufacture has been completed. The tax liability is required to determine on
the date on which services are deemed to have been rendered.

Incidence of Tax under GST

It is essential to determine the time when the supply of goods and services have been
made.
Incidence of Tax under GST may be arise on supply of goods and services, it is necessary
to determine the time of supply of goods and services.
Time of Supply
The liability of GST (including CGST, SGST, UTGST and IGST) depends upon time of supply.
The time when goods or services are supplied, shall be determined the date when the tax
becomes payable under GST. Sec 12 of CGST Act makes the provisions for determining the
time of supply of goods and sec 13 of CGST Act makes provisions for determining the time of
supply of service.
I. Determination of time of supply of goods
Determination of time of supply of goods may be provide the following conditions :
a.Sec 12(2) - Time of Supply of goods under forwarding charges
If a supplier, when supply of goods payable on any forwarding charges is chargeable to
GST.
b.Sec 12(3) - Time of Supply of goods covered under reverse charge
If a supplier payable any of reverse charge for time of supply of goods is chargeable to
GST.
c.Sec 12(4) - Goods supplied through the vouchers
The issue of vouchers for purchase and sale of goods in the business organisation, the
vouchers value may be chargeable to the GST.
d.Sec 12(5) - Residual Value
Sec 12(5) provides that if it is not possible to determine the time of supply as per the
provisions mentioned in sec 12(2), sec 12(3) and sec 12(4) the time of supply shall be as
follows :
(i) Incase of where periodical return has to be filed.
(ii) In any other case, it will be the date on which tax is paid.
II. Determination of time of supply of services (Sec 13 of CGST Act, 2017)
According to the CGST Act provides for determination of time of supply of service
mentioned the following provisions may be taxable :
(a) Sec 13(2) - Time of supply of service covered under forwarding charges.
(b) Sec 13(3) - Time of supply of service on reverse charge.
(c) Sec 13(4) - Supply of service through vouchers.
(d) Sec 13(5) - Residual value of service not covered under sec 13(2), sec 13(3) &
sec 13(4).
5. What is the purpose of determining value of supply ?
A. The amount on which tax shall be levied under GST depends on value of supply. It
includes all intra-state supply and inter-state supply. The value of supply of goods and
services may be calculated using the following formula :
GST Rate = Value of Supply x Rate of GST/100
Transaction Value
Sec 15 of CGST Act, 2017 makes provisions for the purpose of determining the
transaction value of goods and services in different circumstances.
Value of Supply under GST
GST will be charged on the transaction value. Transaction value is the price actually paid
or payable for the supply of goods and services between unrelated parties.
The Value of Supply under GST shall include the following conditions may be satisfied.
The value of supply may be taxable :
a) Any taxes, duties, fees, cess and charges levied under any act, if charged separately
by the supplier.
b) Any amount that the supplier is liable to pay tax, which has been incurred by
receiver and is not included in the price.
c) The value will be included incidental expenses in relation to sales payable by
supplier, such expenses like packing charges, forwarding charges, commission etc.,
d) Any subsidies linked to supply for supplier except the government subsidies will be
included, the value of subsidy may be taxable for value of supply.
e) Any interest, penalty, late fee for delay payment of consideration will be included in
the value of supply.

6. How to calculate transaction value or value of taxable supply ?

A. Transaction value shall be considered as the value of taxable supply. Detailed provisions
of transaction value under sec 15 of CGST calculate the transaction value or value of taxable
supply. The following steps may be given for value of supply :
STEP 1 : Determine the value of taxable supply [sec 15(1)]
Transaction value of the value of supply of goods and services which satisfied the
following conditions :-
a) Transaction value of the supply of goods or services or both.
b) Transaction value the price is actually paid or payable by supplier.
c) Nature of supply must be find out.
d) The price must be the sole consideration.
e) Supplier and receiver must not be related
 f) Value of supply of goods and services must be only of taxable supply.
STEP 2 : Include any taxes in the transaction value [sec 15(2)]
Section 15(2) specifies the expenses which shall be included in the transaction value. The
following conditions may be arise in the value of supply :-
a) Value doesnot include GST, but includes other taxes
Any taxes, duties, fees and charges levied any statue other than SGST and CGST. If
charged separately for any of taxes in any of the act.
b) Amount paid by receiver on behalf of supplier
Any amount which the supplier is liable to pay, connected to the supply, this amount
paid by receiver on behalf of supplier. The amount may be chargeable.
c) Incidental expenses incurred before supply
Incidental expenses including commission and packaging charged by supplier to the
receiver of a supply. Incidental expenses may be chargeable.
d) Interest (or) late fee (or) penalty
Interest (or) late fee (or) penalty for delay payment of any consideration for supply of
goods, the value of supply may be taxable.
e) Subsidy linked to supply
Subsidy linked to supply will be included in the transaction value, except government
subsidy the remaining amount of subsidy may be taxable.
STEP 3 : Deductions from the transaction value
Under section 15(3) of CGST Act the value of supply shall not include any discount, before
the making of time of supply provided such discount has been recorded in the respect of
such supply.
Discount shown on invoice price before the supply of goods, the transaction value will
not be include any discount before making the supply.
Discount allowed by giving credit note, after the supply the deductions may be applicable
for transaction value.

7. Discuss in detail the GST Valuation Rules ?

A. GST Act provides the valuation goods for supply of goods and services, determination of
value of supply in different circumstances. Rule no:1 to Rule no:9 prescribed for valuation
of supply.
RULE 1 : When consideration is not whole in money
Rule no:1 of determination of value of supply provides where the supply of goods and
services is not for consideration in whole in money, the value of supply shall be
a) The open market value of such supply, open market value means full value in money.
b) If open market value is not available, if open market value is not available for goods
or services are not sold in open market. In simple means non-monetary items shall
be determined in monetary items.
RULE 2 : Supply between related person other than through agent
The value of supply of goods and services between related person, other than the supply
through an agent shall be open market value of such supply, if the open market value is not
available and if the value is not determined for the rule 4 & 5.
RULE 3 : Value of supply of goods made or received through an agent
GST Act provides by a principle to his agent where the agent undertakes to supply of
goods on behalf of principle, value of supply of goods between the principle and agent shall
be the open market value of goods being supplied and value of supply is not determined.
RULE 4 : Value of supply of goods and services both on base on cost
The value of supply of goods and service both shall be cost of production, cost of
acquiring and cost of providing services. This principle shall be applied for the purpose of
determining the cost of service.
RULE 5 : Residual Method
Incase where the value of supply of goods or services cannot be determined under rule
no:1 to rule no:4, value shall be determined by using reasonable means which shall be
consistent with the provisions of section 15.
RULE 6 : Value incase of certain supply
The value in respect of supplies specified below shall at the option of the supplier can be
determined in foreign currency, air travel agent, life insurance business, buying and selling
of second-hand goods, redeemable vouchers and value of service provided by one person to
another person may be chargeable for valuation of supply under GST.
RULE 7 : Value of supply incase of pure agent
In many cases the supply of service incurred some expenditure on behalf of receiver of
service and recover same from him. The rule no:7 of valuation rules providing of such
expenditure in determining the transaction value.
RULE 8 : Rate of exchange of currency for determination of value
As per rule 8 of valuation rules exchange for determination of value of taxable goods and
services shall be applicable reference rate for the currency as determined by RBI as on the
date of time of supply in the section 12 & section 13 of the GST Act.
RULE 9 : Manner of calculating tax element where value of supply of tax
Rule 9 of valuation rules provides for calculating the tax element where the amount paid
in the supply of goods and service.

8. What is Input Tax Credit(ITC)? Explain the conditions for claiming ITC under GST ?
A. Input Tax Credit(ITC) has its origin in the concept of MODAVAT. MODAVAT means
Modified Value Added Tax, which was introduced in the year 1986. MODAVAT was
introduced only for manufacturing level. Then after 2004, MODAVAT was replaced by
CENVAT. CENVAT means Central Value Added Tax which provides Credit of Input Tax as well
as input service and output of tax and output of service. In 2005 VAT was introduced in the
concept of Input Tax Credit.
Input Tax Credit means credit allowed of tax payed on inputs. Output tax means tax paid
on outputs.
Input Tax under GST
Section 2(62) of CGST Act provides Input Tax in relation to a registered person payable on
tax CGST or SGST or UTGST and IGST will be charged on supply of goods or services or both.
In a simple language Input Tax under GST includes :
a) IGST will be levied on inter-state supply of goods and services.
b) CGST will be levied on intra-state supply of goods and services.
c) SGST will be levied on intra-state supply of goods and services.
d) UTGST will be levied on intra-state supply of goods and services for UT level.
e) IGST will be levied on import of goods and services.
In this case the composition levy may not be applicable or may not be included in the
input tax.
Input Tax Credit – Types
Input Tax Credit may be divided into 3 types :
i) Input
Input means any goods other than the capital goods is called Input.
ii) Input Service
Any services which are used by supplier for supply of goods and services in the normal
course of business.
iii) Capital Goods
The value of goods which is capitalized in the books of accounts and the value of capital
goods may be recorded in the balance sheet.
Conditions and eligibility for taking ITC
Section 16 of CGST provides every registered person shall be to tax credit, input tax
charged on supply of goods and services. There are four conditions for availability of ITC.
a) Document necessary for available in ITC
Section 16(2) provides the sum of documents which the registered person must possess
to available for ITC. The documents are tax invoice, debit note, any other tax paying under
Customs Act 1962.
b) Receipt of Goods or Services
Section 16(3) provides that the person shall receive the goods or services, the registered
taxable person can use the input of goods and input of service.
c) Tax actually paid to the credit of appropriate government
Section 16(4) provides that the supplier should have actually paid to the credit of
appropriate government the tax amount on the supply made by him.
d) Registered person must have furnished the return under section 39
Section 16(5) provides for the time limit for available of credit by registered taxable
person, it prescribed the time limit in the following two events.
(i) Filing of return under section 39 for the month of September,
(ii) Filing of annual return.