IGST Act · Chapter IV
Determination of Nature of Supply
s. 7Inter-State supply
Section 7 decides whether a supply is inter-State, and so whether IGST is charged under section 5 rather than CGST and SGST. The test compares two locations — the supplier's and the place of supply — and adds deeming rules for imports, exports and SEZ supplies.
- Under section 7 of the IGST Act, 2017 a supply is inter-State when 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.
- Goods imported into India are in inter-State supply until they cross the customs frontiers of India (section 7(2)); imported services are always inter-State supplies (section 7(4)).
- Exports, and supplies to or by an SEZ developer or SEZ unit, are inter-State supplies even if supplier and recipient are in the same State (section 7(5)).
- A supply taxed under the wrong head — CGST and SGST instead of IGST or the reverse — is corrected by paying under the right head and claiming refund of the wrong tax (section 19 IGST, section 77 CGST).
s. 8Intra-State supply
Section 8 is the counterpart of section 7: a supply is intra-State — taxed as CGST plus SGST/UTGST — when supplier and place of supply are in the same State or Union territory. It then carves out supplies that are never intra-State, and its Explanations decide when two establishments of one business are "distinct persons".
- Under section 8 of the IGST Act, 2017 a supply is intra-State when the location of the supplier and the place of supply are in the same State or the same Union territory.
- Supplies to or by an SEZ developer or unit, goods imported until they cross the customs frontiers, and supplies to international tourists under section 15 are never intra-State supplies.
- Under Explanation 1 to section 8, an establishment in India and one outside India, or establishments in different States or UTs, are establishments of distinct persons; "business verticals" were dropped from the Explanation from 01.02.2019.
- A person with a branch, agency or representational office in a territory has an establishment there (Explanation 2).
s. 9Supplies in territorial waters
Section 9 answers a question the rest of the Act cannot: in which State is a supplier or a place of supply located when it is at sea within India's territorial waters — an offshore platform, a vessel, a port anchorage? It assigns it to the nearest coastal State or Union territory, so the inter-State or intra-State test can be applied.
- Under section 9 of the IGST Act, 2017, where the location of the supplier or the place of supply is in the territorial waters, it is deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.
- Section 9 overrides the rest of the IGST Act ("notwithstanding anything contained in this Act").
- Territorial waters extend twelve nautical miles from the baseline under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976.