GST has introduced a number of terms and acronyms that a business needs to get familiar. While some of these might sound jargonish, a good understanding of these terms will help business owners run their business smoothly.
B to B
Any sale or transaction that takes place between to registered persons will be deemed a B to B sale.
B to C
Any sale or transaction that takes place between one registered person and one or more unregistered persons will be a B to C sale – sale of goods by a retail business to consumers will typically be a B to C sale.
Central Goods and Services Tax or CGST is the component of GST that is collected by the central government on sales of goods and services. It replaces the taxes such as service tax, levied by the central government in the past.
GSTIN or Goods and Services Taxpayer Identification Number is a unique number assigned to each registered entity. It is 15 characters (combination of digits and letters) long and is based on the PAN of the business.
The Harmonized System of Nomenclature of HSN is an internal system of naming goods. HSN is assigned to goods by organizing them in a hierarchical manner and is 8 digits long. However, a good can be identified broadly by using no less than 2 digits, and very specifically by using all the 8 digits. Depending on the turnover or nature of sale, a business might be required to quote a 2-digit HSN, a 4-digit HSN or an 8-digit HSN (mandatory for exports).
Integrated Goods and Services Tax or IGST is the GST applicable on sale of movement of goods and services between two states. It is uniform across all states and the revenue from this tax will be split between the central government and the state of supply.
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can use to reduce its tax liability when it makes a sale.
Service Accounting Code or SAC is the nomenclature adopted by the GST Council for identifying services delivered under GST. This is similar to the classification that was in existence under the Services Tax regime.
Reverse Charge Mechanism or RCM is the mechanism under which the recipient of a good or service pays GST on behalf of the supplier. It is used as an exception, for example, when the supplier of a good or service is not registered.
State Goods and Services Tax or SGST is the state’s component of tax on movement or sales of goods and services within a state. This tax replaces the earlier taxes levied by various state governments on sale of goods.