How to Manage Multi-State Tax Compliance in India?

Do you think the tax structure and its implementation are the same for every corner of India? Well, it’s not. While GST has unified indirect taxation, each state still retains authority over registration thresholds, local professional taxes, and regulatory timelines. Businesses operating in multiple states must obtain separate GST registrations for each state and comply with location-specific filings, audits, and e-way bill regulations.

This complexity increases with business scale, especially for those expanding into new regions or managing decentralised operations. Inconsistencies in local interpretation of tax laws, frequent regulatory updates, and logistical hurdles can create risks of non-compliance and penalties. For growing businesses, multi-state tax compliance is not just a legal necessity but a strategic imperative. Proper compliance ensures uninterrupted operations, builds trust with stakeholders, and enhances credibility during audits or funding rounds. 

Understanding tax regulation in multi-state operations

Managing tax compliance in different states starts with understanding the operational footprint of your business across different states. Multi-state operations involve having a physical presence or conducting significant business activities like sales or services in more than one state. Each state where the business operates may require separate GST registration, along with adherence to state-specific regulations like professional tax, labour laws, and local filings.

This decentralisation means businesses must track transactions, inventory, and employee activities by state, ensuring accurate reporting and timely compliance. Failure to comply with state-specific rules can lead to fines, disrupted supply chains, or loss of tax credits. Therefore, a robust framework that includes centralised data management, local compliance tracking, and periodic audits is essential. Understanding these nuances allows businesses to structure their operations effectively, avoid legal pitfalls, and maintain a strong growth trajectory across multiple regions.

What qualifies as operating in multiple states?

A business is considered to be operating in multiple states if it has branches, warehouses, or active sales operations across different states. For example, if a company headquartered in Delhi opens a branch office in Maharashtra and a warehouse in Karnataka, it must register separately for GST in each of those states.

Similarly, if a business supplies goods to customers in Gujarat and Tamil Nadu from different locations or warehouses, each point of supply constitutes a state-specific operation. Even without physical offices, consistent sales or service delivery in another state, like a digital service provider selling subscriptions pan-India, may trigger the need for registration if the turnover exceeds prescribed thresholds. Each such location must comply with state-specific laws, including GST filings, professional tax, and labour regulations. Properly identifying these operational zones is crucial for streamlined compliance and sustainable expansion.

Even e-commerce businesses or those supplying services remotely may need to register in multiple states if they meet specific criteria, such as crossing the registration threshold or having a contractual obligation. 

GST registration in multiple states: Points to note

The Goods and Services Tax (GST) regime mandates businesses to obtain separate GST registrations for each state where they have a place of business. 

Mandatory separate registration

Each state operates as a separate jurisdiction under GST. If your business operates in five states, you must apply for five distinct GSTINs (one per state), regardless of the size of operations in each region.

Threshold limits

While the general threshold for GST registration is ₹40 lakhs for goods and ₹20 lakhs for services (₹10 lakhs for special category states), any interstate supply automatically requires registration, even if the turnover is below the threshold.

Compliance per GSTIN

Every state-wise registration entails independent compliance, such as maintaining separate books, filing state-specific GST returns (GSTR-1, GSTR-3B), and reconciling input tax credits. Mistakes in one GSTIN do not affect others but must be managed separately.

Branch transfers

Transfer of goods between branches in different states is treated as taxable supplies under GST, requiring proper invoicing and tax payment.

Technology & tracking

Managing multiple GSTINs efficiently requires robust accounting software and centralised compliance tracking to avoid errors and penalties.

Proactive registration and diligent management across states enable smoother operations and tax efficiency for growing businesses.

How to obtain GSTIN in each state?

For businesses managing multi-state tax compliance in India, obtaining a separate GSTIN for each state is essential. Here’s a quick overview of the process:

1. Go to www.gst.gov.in and select ‘New Registration’.
2. Select the state where you need the GSTIN, and enter your PAN, business type, and email/mobile number.
3. You’ll receive an OTP for verification in your registered email and phone.
4. Enter your business address, authorised signatory, and bank details.
5. Upload required documents (PAN, address proof, identity proof, photos, etc.).
6. Submit the application to receive an ARN. Once verified, the GSTIN is issued within a few working days.

Repeat this process for each state where registration is needed.

What are the invoicing requirements for intra-state and inter-state transactions?

When managing multi-state tax compliance in India, understanding invoicing rules is crucial for accurate GST reporting and input tax credit (ITC) claims.

• Intra-state transactions:  When both the supplier and recipient are in the same state, invoices must reflect CGST and SGST (Central and State GST) separately. This applies to supplies made from one branch to another within the same state or to customers in that state.
• Inter-state transactions: For transactions where the supplier and recipient are in different states, the invoice must charge IGST (Integrated GST). This includes branch transfers, sales, or services across state borders.

Each invoice should include:

• Supplier and recipient GSTINs
• Invoice number and date
• HSN/SAC codes for goods/services
• Taxable value and applicable tax rates
• Place of supply (especially important for interstate)
• Signature of the authorised person

Correct invoicing supports seamless compliance and avoids tax mismatches in multi-state operations.

E-way bill and e-invoicing

An e-way bill is a digital document required to transport goods valued over ₹50,000. It is generated on the GST portal and must accompany goods during transit, ensuring transparency and reducing tax evasion. Businesses need to ensure that an e-way bill is created for every interstate or intrastate movement of goods, depending on state-specific thresholds. However, some states may have additional requirements, such as specific registration for transporters or more stringent checks on certain types of goods, leading to variations in compliance across states.

State-specific conditions may also apply to the validity of e-way bills, which can vary based on the distance of transport and type of goods. Some states require additional documentation or restrict the use of certain transport methods. Businesses must be aware of these varying rules to ensure smooth operations.

In contrast, e-invoicing is a standardised digital invoicing system implemented across India for businesses with a turnover above ₹5 crores. Unlike the e-way bill, e-invoicing does not have state-specific conditions and applies uniformly across all states. It simplifies tax compliance by ensuring that the GST system authenticates invoices before they are issued. Both systems, while distinct, play a key role in managing tax compliance for businesses operating in multiple states.

Best practices for managing multi-state GST registration

Managing multistate GST registrations can be complex, as each state may have different compliance requirements. Adopting the following best practices can simplify the process, minimise errors, and ensure smooth GST compliance nationwide.

1. Leverage technology for accuracy

Use reliable software tools to automate filings and maintain precise records, reducing errors in GST submissions.

2. Stay updated on state-specific regulations

Keep track of the latest GST rules and changes in different states to ensure compliance and avoid penalties.

3. Centralise data management

Consolidate data from multiple locations into a single system to make GST return filing more efficient and organised.

4. Automate the GST filing process:

 Implement automation for return filings across all registered states to save time and minimise manual errors.

H2: Infographic content: Technologies for managing multiple GST registrations

Conclusion

Being aware of multi-state tax compliance is crucial for businesses operating across India. When a business understands state-specific regulations, it ensures smooth operations without having to pay penalties and maximising tax efficiency. With the evolution of tax rules and compliance requirements, it has become mandatory for enterprises to deploy digital tools and automated software, which can reduce manual errors, streamline compliance processes, and ensure timely filings. These tools help businesses stay organised, mitigate risks, and focus on growth while maintaining compliance across multiple states.