Context
Every GST invoice has to answer one structural question before the tax line can be filled in: is this an intra-state or an inter-state supply? The answer decides whether the seller charges CGST + SGST (two taxes) or a single IGST. The flow above reduces it to one comparison — supplier state versus place of supply — and the IGST Act[5] supplies the test.
The two inputs are the supplier's location (the state where the seller is registered) and the place of supply (fixed by Sections 10–12 of the IGST Act[3], which lay down where a given supply of goods or services is deemed to occur). Section 8 of the IGST Act[2] defines an intra-state supply as one where supplier location and place of supply are in the *same* state. Section 7[1] defines an inter-state supply as one where they are in *different* states (or one is outside India). That single same-state / different-state distinction is the whole test.
When the test returns *same state*, the supply is intra-state and the seller levies CGST + SGST — the central and state components together making up the applicable rate. An 18% rate becomes 9% CGST plus 9% SGST; the central half flows to the Centre and the state half to the state where the supply occurs. When the test returns *different states*, the supply is inter-state and the seller levies a single IGST at the full rate — 18% as one line. IGST is collected by the Centre and then apportioned to the destination state, which is why a single combined tax replaces the split.
The most common error is using the buyer's billing address instead of the statutory place of supply, or assuming a customer in another state always means IGST regardless of where the goods actually move. It is the *place of supply* under Sections 10–12, not the address on the buyer's letterhead, that governs. Exports and supplies to SEZ units are treated as inter-state but zero-rated, so they sit in the IGST branch at a nil effective rate. Getting this test right is what makes the GST split on a tax invoice correct — and a wrong split is one of the cleanest ways to fail return reconciliation.