Understanding GST doesn’t have to feel like decoding a secret language. Whether you’re a business owner, accountant, or finance professional, this glossary breaks down key GST terms in plain English—sprinkled with practical examples.
1. GSTIN (Goods and Services Tax Identification Number)
Think of GSTIN as your business’s tax ID. Every registered taxpayer gets this 15-digit number that helps the government track GST compliance.
📌 Example: A textile trader in Delhi with GSTIN 07ABCDE1234F1Z5 uses this number while filing returns and issuing invoices.
👉 Want to know more? Dive into our guide: GSTIN Explained: 15-Digit Tax ID & Compliance Guide 2025.
2. GST Return
A GST Return is a digital form that businesses file to report their sales, purchases, and tax liabilities. Filing correctly keeps you on the right side of compliance.
📌 Example: A small café owner must file GSTR-1 to report monthly outward supplies (sales).
For a practical breakdown, check out: GST Return Filing in 2025: A Clear Step-by-Step Guide.
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3. Input Tax Credit (ITC)
ITC allows businesses to reduce tax liability by claiming credit for the GST already paid on purchases.
📌 Example: A furniture dealer buys raw wood worth ₹1,00,000 + GST of ₹18,000. Later, he sells furniture and charges GST of ₹25,000. He can use ITC to pay only ₹7,000 (₹25,000 – ₹18,000).
For quick rules, read: Input Tax Credit Rules: Stay Compliant Easily.
4. Reverse Charge Mechanism (RCM)
Usually, sellers pay GST. But under RCM, the buyer pays directly to the government.
📌 Example: Importing legal services from abroad? The Indian business receiving the service pays GST under RCM.
5. HSN & SAC Codes
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HSN (Harmonized System of Nomenclature): Used for goods.
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SAC (Services Accounting Code): Used for services.
📌 Example: Selling footwear? Use HSN code 6403. Offering auditing services? Use SAC code 9982.
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6. E-Way Bill
This is a digital permit for transporting goods worth more than ₹50,000. It ensures tax isn’t evaded during transit.
📌 Example: A logistics company moving goods from Chennai to Bengaluru must generate an e-way bill before dispatch.
7. Composition Scheme
A simplified GST scheme for small businesses with turnover below ₹1.5 crore. Instead of complex returns, they pay tax at a fixed rate.
📌 Example: A small bakery with turnover of ₹75 lakh pays tax at a flat rate without claiming ITC.
8. GST Council
The governing body that decides GST rates, rules, and amendments. Members include the Union Finance Minister and finance ministers of all states.
📌 Fun Fact: The GST Council has revised tax rates on items like hotel rooms, mobile phones, and cement multiple times since 2017.
For background reading, see: Investopedia’s GST Overview.
9. IGST, CGST, SGST/UTGST
CGST (Central Goods and Services Tax)
The Centre’s share of GST on sales within a state.
👉 Example: Buy a shirt for ₹1,000 in Mumbai with 12% GST = ₹120. Half (₹60) is CGST.
SGST (State Goods and Services Tax)
The state’s share of GST on sales within a state.
👉 Example: From the same shirt, ₹60 goes to Maharashtra as SGST.
IGST (Integrated Goods and Services Tax)
Tax for interstate sales, collected by the Centre.
👉 Example: A seller in Tamil Nadu ships goods to Kerala. IGST applies instead of CGST+SGST.
10. GST Audit
A process where authorities verify whether a business filed returns correctly and paid the right taxes.
📌 Example: A company with turnover above ₹5 crore may face a GST audit.
Final Word
GST may look heavy with jargon, but once you crack the code, compliance becomes manageable—and even strategic.👉 Get actionable insights with GSTIN Analysis – Simplify your process today.
