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.
Key points
- 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).
The provisions
7(1)–(2)Goods
Statutory text
(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State trade or commerce.
(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.
HistoryHigh-sea sales and sales from a customs warehouse— Outside GST since 01.02.2019; IGST is collected once, at customs.
Paragraph 8 of Schedule III to the CGST Act, in force from 01.02.2019, treats as neither goods nor services (a) a supply of warehoused goods before clearance for home consumption and (b) a high-sea sale — a transfer of documents of title after dispatch from the foreign port but before clearance. IGST is charged once, at clearance, on the value declared by the person who clears the goods (Customs Circular 33/2017 dated 01.08.2017).
7(3)–(4)Services
Statutory text
(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in-
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade or commerce.
(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.
What it means
The same two-location test applies to services, with the place of supply under section 12 (supplier and recipient both in India) or section 13 (either outside India).
Sub-section (4) makes every import of services an inter-State supply, whatever the recipient's State. With the recipient usually liable on reverse charge, the importer pays IGST and takes credit of it.
7(5)Exports, SEZ supplies and the residual clause
Statutory text
(5) Supply of goods or services or both,-
(a) when the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,
shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
What it means
- (a) Supplier in India, place of supply outside India — exports of goods and services. Whether IGST is actually paid is then governed by zero-rating under section 16.
- (b) Any supply to or by an SEZ developer or SEZ unit — even from a supplier in the same State. Section 8's provisos make the same point from the other side. A supply to an SEZ for authorised operations is zero-rated under section 16.
- (c) A residual clause: any supply in the taxable territory that is not intra-State and is not covered above is inter-State.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- When is a supply inter-State under GST?
- Under section 7 of the IGST Act, 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; imports, exports and SEZ supplies are inter-State by deeming.
- Is a supply to an SEZ unit in the same State inter-State?
- Yes. Section 7(5)(b) treats every supply to or by an SEZ developer or unit as inter-State, so IGST applies — and a supply for authorised operations is zero-rated under section 16.
- Are imported services an inter-State supply?
- Yes, always — section 7(4). IGST applies, usually paid by the recipient on reverse charge.
- What if CGST and SGST were paid on what was really an inter-State supply?
- Pay IGST and claim refund of the CGST and SGST wrongly paid — section 77 CGST; section 19 IGST covers the reverse case. No interest is payable on the correct tax.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
For goods, compare the location of the supplier with the place of supply under section 10. If they fall in two different States, two different Union territories, or a State and a Union territory, the supply is inter-State. "Subject to the provisions of section 10" means the place of supply is always fixed first.
Sub-section (2) deals with imports: goods brought into India remain in inter-State supply until they cross the customs frontiers — the limits of the customs area under the Customs Act. That is why IGST, not CGST and SGST, is collected on them at import.