Inter-state sales and purchases involve the movement of goods from one state to another. In such cases, the Integrated Goods and Services Tax (IGST) is applicable instead of CGST and SGST.
Let’s take an example to understand how IGST computation works in inter-state sales and purchases:
Suppose a manufacturer, ABC Company, in Gujarat sells goods worth Rs. 1,00,000 to a buyer in Maharashtra. The applicable IGST rate is 18%.
In this case, the IGST payable by ABC Company will be:
- IGST payable = 18% of Rs. 1,00,000 = Rs. 18,000
ABC Company will collect Rs. 18,000 as IGST from the buyer and deposit it with the government. The buyer can claim this IGST as a credit against the IGST payable on its subsequent sales.
Now, let’s assume that the same buyer in Maharashtra purchases goods worth Rs. 80,000 from a supplier in Gujarat. The applicable IGST rate is 18%.
In this case, the IGST credit available to the buyer will be:
- IGST credit = 18% of Rs. 80,000 = Rs. 14,400
So, the net IGST payable by the buyer will be:
- Net IGST payable = IGST on purchases – IGST credit = (18% of Rs. 80,000) – Rs. 14,400 = Rs. 2,400
Therefore, the buyer will deposit Rs. 2,400 as IGST liability with the government.
In summary,
in inter-state sales and purchases, IGST is applicable instead of CGST and SGST. The seller will collect IGST from the buyer and deposit it with the government. The buyer can claim this IGST as a credit against the IGST payable on its subsequent sales. The net IGST payable will be calculated by subtracting the IGST credit from the IGST on purchases.
