Section 7 of IGST explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 7 of the IGST Act, 2017 defines inter-State supply. A supply is inter-State when the supplier's location and the place of supply lie in different States, different Union territories, or a State and a UT. It also treats imports, exports, SEZ supplies, and any taxable-territory supply that is not intra-State as inter-State — all attracting IGST.
What Section 7 Says — In Plain English
The single most important classification in the whole GST system is whether a supply is inter-State or intra-State, because that decides whether you charge one IGST or a pair of CGST and SGST. Section 7 is the rule that makes that call for the inter-State side. Its logic is simple: compare where the supplier is located with the place of supply (fixed by the place-of-supply rules). If they sit in two different States or UTs, the supply crosses a boundary and is inter-State. Section 7 then goes further and expressly sweeps in imports, exports and SEZ dealings, and finishes with a residual clause so that anything in the taxable territory that is not intra-State is inter-State — leaving no transaction unclassified.
Clause / Sub-section Breakdown
- 7(1) / 7(3) — goods (7(1)) and services (7(3)) are inter-State where supplier location and place of supply are in different States, different UTs, or a State and a UT.
- 7(2) — goods imported into India are inter-State supply till they cross the customs frontiers.
- 7(4) — supply of imported services is deemed inter-State.
- 7(5) — exports (supplier in India, place of supply outside India), supplies to or by an SEZ developer/unit, and any taxable-territory supply not intra-State are all inter-State.
Applicability & Scope — Who & When
Section 7 is the test applied before IGST is charged under Section 5. Once a transaction is inter-State under Section 7, IGST — not CGST plus SGST — is levied. It works with the place-of-supply rules in Sections 10 to 14, which pin down the place of supply; Section 7 then compares that place with the supplier's location. A vital practical carve-out: SEZ supplies are deemed inter-State even where the supplier and the SEZ are in the same State, so an intra-State-looking supply to an SEZ still attracts IGST (usually zero-rated).
Worked Examples
Example 1 — Classic inter-State sale. A furniture maker in Pune (Maharashtra) sells office chairs worth ₹3,00,000 to a company in Hyderabad (Telangana). Supplier location is Maharashtra and place of supply is Telangana. Different States means Section 7(1) makes it inter-State, so IGST at 18% (₹54,000) applies.
Example 2 — Same-State SEZ supply. The same Pune supplier sells to an SEZ unit located within Maharashtra worth ₹3,00,000. Although both are in one State, Section 7(5) deems the supply inter-State, so it is an IGST supply — typically zero-rated under Section 16, letting the supplier claim a refund of input tax. This shows how the SEZ rule overrides the ordinary same-State test.
Step-by-Step / How It Works
- Identify the supplier's location.
- Determine the place of supply under Sections 10 to 14.
- Compare the two; if in different States/UTs, or if it is an import, export or SEZ supply, it is inter-State.
- Charge IGST under Section 5, applying zero-rating for exports and SEZ supplies under Section 16.
Common Mistakes & Practical Notes
- Treating a same-State SEZ supply as intra-State — it is inter-State and attracts IGST.
- Charging CGST + SGST on an import of services instead of IGST under 7(4).
- Overlooking the residual clause, which classifies otherwise-unclassified taxable-territory supplies as inter-State.
- Confusing the customs-frontier point at which imported goods stop being an inter-State supply.
- Forgetting that exports are inter-State and zero-rated, not simply outside GST.
Related Sections (CGST cross-refs)
- Section 5 — Levy of IGST on inter-State supplies determined under Section 7.
- Section 8 — Intra-State supply, the mirror image attracting CGST plus SGST.
- Sections 10-13 — Place-of-supply rules used with Section 7.
- Section 16 — Zero-rating for exports and SEZ supplies deemed inter-State.
Recent Amendments & Context
The structure of Section 7 has held firm, but its practical edges are continually shaped by clarifications on place of supply — for instance for services connected to immovable property, transportation and advertising — which in turn decide whether a supply falls on the inter-State side. SEZ treatment has also been refined through circulars on when SEZ supplies qualify as zero-rated versus taxable.