Every GST invoice must be either intrastate or interstate — and this classification decides which taxes you charge. The mistake of applying CGST+SGST on an interstate invoice (or IGST on an intrastate one) is correctable but creates work. This guide shows you how to classify every transaction correctly.
By Arjun Sharma· GST & Tax Compliance Specialist···Reviewed for GST accuracy
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The Core Difference
Supply Type
Tax Applied
Total Rate (18% GST)
Who Gets Tax
Intrastate (same state)
CGST + SGST
CGST 9% + SGST 9%
Centre + Supplier's State
Interstate (different states)
IGST
IGST 18%
Centre (then apportioned to destination state)
Within UT (no legislature)
CGST + UTGST
CGST 9% + UTGST 9%
Centre + UT administration
What is "Place of Supply"?
Whether supply is intrastate or interstate is determined by "place of supply," not the delivery address or billing address. Place of supply is a legal concept defined in the IGST Act.
For goods: place where goods are delivered
For most services (B2B): location of the registered recipient
For most services (B2C): location of the supplier
For immovable property: location of the property
For events: where the event is held
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Import of goods and services into India is treated as interstate supply. IGST is levied (and for imports, it is collected by customs at the point of entry). Export of goods and services is "zero-rated" — you can export without paying GST (under LUT) or with GST and claim a refund.
What Happens if You Apply the Wrong Tax?
If you wrongly charge CGST+SGST on an interstate supply (or IGST on an intrastate supply), the buyer cannot correctly claim ITC. The tax department can raise a demand for the correct tax even though you paid an equivalent amount under the wrong head.
Important
To correct a wrongly taxed invoice: issue a credit note cancelling the original, then issue a new invoice with the correct tax type. The credit note and new invoice must both be reported in GSTR-1.
How an Online Generator Handles This Automatically
A good GST invoice generator asks for both the supplier's state and the buyer's state. It then automatically applies CGST+SGST for same-state transactions and IGST for different states. This eliminates the most common classification error.
FAQs
What if my company has branches in multiple states?
Each branch is treated as a separate GSTIN. Supply between branches of the same company across states is also an interstate supply subject to IGST. This is called "cross-charge" or "branch transfer" and must be invoiced properly.
Is J&K treated as a separate state for GST purposes?
Yes. After the reorganisation of Jammu & Kashmir into two Union Territories — J&K (with legislature) and Ladakh (without legislature) — both are separate territories for GST. J&K uses SGST, Ladakh uses UTGST.
Can the place of supply be outside India?
For exports, the place of supply is outside India. This makes it an "inter-state" supply under Section 7(5) of the IGST Act, which is then zero-rated.
Does state of billing address matter for GST?
For B2B supplies (registered buyer), the billing/GSTIN state matters more than the delivery state in many cases. For goods, it is delivery state. For most services, it is the GSTIN/registered state of the recipient.
Why Businesses Stop Using Excel for GST Invoices
Manual GST calculation mistakes
One wrong CGST/SGST split or a misapplied rate triggers notices and ITC denial for your buyer.
Slow invoice creation
Copying last month's Excel file, updating dates, recalculating — 20 minutes for what should take 30 seconds.
Formatting breaks on every device
Excel invoices look different on every printer and PDF converter. Clients complain about unreadable layouts.
No easy sharing or payment link
Sending PDFs over WhatsApp with no way for clients to pay directly slows down collections.
Incorrect tax type (IGST vs CGST+SGST)
Excel can't auto-detect intra vs inter-state supply. Wrong tax type = ITC rejected for your buyer.
Disclaimer: The information in this article is for general informational purposes only and does not constitute professional tax, legal, or financial advice. GST rules and rates are subject to change. Consult a qualified CA or tax professional before making compliance decisions.
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