10 Pieces of Jargon to Understand GST Better

It’s Saturday night and you are on that much planned and long-awaited outing with your friends. You had fun, ate your fill, and enjoyed yourselves a lot. The bill is here, and you are trying to split it properly. But what’s this extra charge at the bottom? This is the Goods and Services Tax or GST that you are liable to pay. Navigating and understanding GST often proves a difficult task, especially when paying restaurant bills. 

 

Down the Rabbit Hole

 

As a customer you should be aware of various components of GST. Let’s break down some important jargon that can help you demystify the GST puzzle! 

1. CGST, SGST, and IGST

GST is classified into four major taxation components – Central GST (CGST), State GST (SGST), Integrated GST (IGST) and Union Territory GST (UTGST). The differentiation helps taxpayers understand who they are paying tax to and promotes transparency in the country’s taxation cycle. 

2. Input Tax

Input Tax with respect to a registered individual refers to the type of GST (CGST, SGST, IGST, or UTGST) charged on any form of service and/or goods towards the person. It includes the taxes charged on the import of goods, and those payable under selected provisions of the various GST Acts (CGST, IGST, SGST, and UTGST). However, it does not include any tax paid under the composition levy.  

3. Input Tax Credit

Input Tax Credit [ITC] is the credit received by manufacturers for paying input taxes for the manufacture of products. Similarly, dealers who have purchased goods for resale are also entitled to input tax credit. The credit of input taxes on an item used to make another item could be taken by the maker of the latter while paying tax on the output product. ITC can only be claimed for business purposes and is not available for specific services or goods such as for personal use, exempt supplies, or those on which ITC is specifically unavailable.  

4. GSTIN

GSTIN or Goods and Services Taxpayer Identification Number is a 15-digit unique alpha-numeric code allotted to every taxpayer, depending on their PAN Card and State of residence. Some of its key uses of a GSTIN are –  

• Allows a business to be legally recognised as a goods and services supplier; 
• Guarantees input credit, helping a business be more competitive than smaller firms;  
• Helps build your own e-commerce website or register on one; 
• Individuals can claim input tax credit on their purchases with a valid GSTIN;  

5. GSTN

The Goods and Services Tax Network (GSTN) is a non-profit, non-government, private limited corporation that was incorporated in 2013. The Central and State Governments hold a 49% stake in GSTN while private players own the remaining 51%. It provides IT services and infrastructure to the central and state governments, taxpayers, and other stakeholders and ensures that GST is smoothly implemented countrywide.  

6. Reverse Charge

Reverse Charge is a supervisory mechanism used to monitor and boost the compliance, coverage, and synchronization of taxation in India. Usually, any supplier of goods or services has to pay GST. However, in certain cases such as imports and notified supplies, this taxpaying liability could switch to the recipient. This occurs as per the reverse charge mechanism. Thus, recipients have to pay tax based on the supply of specific goods and services, instead of the supplier.  

7. Compliance Rating

The GST Compliance Rating is a kind of performance rating allotted to all registered taxpayers in India. This rating shows how complaint a supplier is with respect to various provisions of GST. This gives buyers the option to choose a seller based on their GST Compliance Rating. It is formulated on a scale of 1 to 10 where 10 denoted the highest compliance and 1 refers to the least compliance.  

8. GST Registration Certificate

A GST Registration Certificate is a legal document issued by relevant tax authorities to a GST-registered company or business. Under this system, enterprises that have a minimum annual revenue of ₹20 Lakhs and certain other special businesses must be registered. This is issued by filling out Form GST REG-06. GST-registered taxpayers can download this certificate from the official GST Portal. All GST-related details of an enterprise are mentioned on this document, including legal name, trade name, address, date of liability, GSTIN, types of registration, validity period, etc.  

Read more: GST Registration Process in India

9. Zero Rating

Zero rating means that certain goods and services have been placed under the ‘zero’ GST slab, that is, they are exempt from tax when purchased. Many essential food items which are regularly consumed have been given a zero tax rating, like fresh vegetables and fruits, milk, flour, bread, natural honey, eggs, types of salts, fresh meat, etc. Certain non-edible items like stamps, drawing and colouring books, sindoor, and kajal also have a zero rating.  

10. GST Return

GST Return or GSTR is a document containing the details of a taxpayer’s income which they are supposed to file with tax authorities for calculating their tax liability. There are a total of eleven kinds of GST returns, from GSTR-1 to GSTR-11, which capture and cater to different categories of taxpayers. 

A GSTR primarily includes: 

• Purchase data 

• Sales data 

• Input Tax Credit (As paid on purchases) 

• Output GST (As derived from Sales) 

   

Today, the scope and integration of GST has become so vast that it has become difficult to summarise the concept. Beyond these 10 jargons, there is much more to learn and understand about this very important taxation system. To know more about GST, you can check out the comprehensive page about various details related to GST, only on the Bajaj Markets website.