Understand about Inter-State Sales and Purchase – IGST Computation. Under the Goods and Services Tax (GST) framework in India, taxation of goods and services depends on whether the transaction is within a state or between states. When a transaction takes place between two different states, Integrated Goods and Services Tax (IGST) is levied.
For SMEs and startups, understanding IGST Computation is vital to ensure accurate tax payment and compliance. Let’s explore how inter-state sales and purchases work under GST.
What is IGST?
IGST stands for Integrated Goods and Services Tax, applicable on all inter-state transactions of goods and services. It is collected by the central government and later distributed between the center and the destination state.
Key Point: If you sell goods from Delhi to Maharashtra, IGST applies instead of CGST + SGST.
When is IGST Applicable?
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Sale of goods/services from one state to another
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Import of goods/services (IGST collected at customs)
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Export transactions (usually with refund/zero-rated supplies)
This makes IGST the backbone of India’s “One Nation, One Tax” system.
✅ IGST Computation with Example
Here’s a simple table to understand how IGST is computed:
| Particulars | Amount (₹) | GST Rate | Tax (₹) |
|---|---|---|---|
| Sale Value (Delhi → Mumbai) | 1,00,000 | 18% (IGST) | 18,000 |
| Purchase Value (Kolkata → Delhi) | 50,000 | 12% (IGST) | 6,000 |
Net IGST Liability:
Thus, businesses can adjust IGST credit from purchases against IGST payable on sales.
Difference Between CGST, SGST, and IGST
| Tax Type | Applicable On | Collected By |
|---|---|---|
| CGST | Intra-state sales | Central Govt |
| SGST | Intra-state sales | State Govt |
| IGST | Inter-state sales & imports | Central Govt (shared later) |
Importance of Accurate IGST Computation
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Prevents Double Taxation: Ensures fair credit utilization.
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Maintains Compliance: Incorrect IGST reporting leads to penalties.
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Cash Flow Efficiency: Businesses save money by correctly adjusting input IGST.
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Supports Interstate Trade: Simplifies transactions across states.
Common Mistakes in IGST Computation
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Charging CGST + SGST instead of IGST on inter-state invoices.
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Not reconciling IGST input credit with GSTR-2B.
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Wrongly reporting sales in GSTR-1 and GSTR-3B.
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Missing refund claims for IGST paid on exports.
Conclusion: Simplify IGST with Expert Guidance
Accurate IGST Computation is essential for inter-state transactions. It helps businesses avoid penalties, use tax credits effectively, and stay compliant with GST laws. hope you get the clarity about Inter-State Sales and Purchase – IGST Computation.
👉 Need help with IGST computation and GST filing? Contact us today.