GST Terms and Phrases, Key Concepts,

The Goods & Services Tax (GST) is a comprehensive reform that unifies multiple indirect taxes into one seamless system. This guide covers essential GST concepts, terms, and practical implications, helping you understand the taxes replaced by GST and other key terms that every taxpayer should know.

Taxes Replaced by GST

A. Taxes Levied and Collected by the Centre

• Central Excise Duty
• Additional Duties of Customs (commonly known as Countervailing Duty or CVD)
• Special Additional Duty of Customs (SAD)
• Service Tax

B. Taxes Levied and Collected by the State

• State VAT
• Central Sales Tax (CST) (Levied by the Centre, collected by State Governments)
• Entertainment and Amusement Tax (except when levied by local bodies)
• Taxes on Lotteries, Betting, and Gambling
• Entry Tax
• Octroi

Key GST Terms and Their Significance

Input Tax Credit (ITC)

Definition: Input tax is the GST paid or payable on the purchase of goods and services, including GST paid as SGST, CGST, and IGST.

How It Works: You can deduct the GST paid on inputs from the GST charged on outputs, effectively eliminating the cascading effect of tax.

Important Note: Businesses under the Composition Scheme are not eligible to claim ITC.

Taxable Person

A Taxable Person is anyone conducting business in India who is registered—or is required to be registered—under the GST Act. This includes individuals, companies, firms, LLPs, trusts, and various other entities.

Who Must Register Under GST?

• Businesses with an annual turnover exceeding Rs.20 lakh (or Rs.10 lakh for specified North-Eastern/hill states).
• Entities already registered under previous indirect tax laws (Excise, VAT, Service Tax, etc.).
• Persons engaged in inter-state supply, casual taxable persons, non-resident taxable persons, and e-commerce operators, among others.

Casual & Non-Resident Taxable Persons

A Casual Taxable Person is one who occasionally supplies goods or services in a region where GST applies without having a fixed place of business there.

Example: A consultant based in Bangalore providing services in Pune occasionally would be considered a casual taxable person in Pune.

A Non-Resident Taxable Person supplies goods or services in India occasionally without maintaining a fixed place of business in the country.

Example: A foreign entity offering short-term services in India qualifies as a non-resident taxable person.

Reverse Charge

Under Reverse Charge, the liability to pay GST shifts from the supplier to the recipient. The government specifies which supplies fall under this mechanism.

Current Examples (under Service Tax): Manpower supply, mutual fund agent services, works contracts, and goods transport agencies.

Applicability Under GST: Reverse charge applies to both goods and services, and those liable must maintain detailed records of their inward supplies.

Place of Business, Imports, Exports & Other Key Concepts

Place of Business

Definition: The “place of business” is defined as:

• (a) The location from which business is ordinarily conducted (e.g., a warehouse or godown).
• (b) The place where a taxable person maintains their books of account.
• (c) A location where a taxable person carries on business through an agent.

Imports

Import of Goods

This refers to bringing goods into India from any location outside the country. For imported goods, IGST is levied along with applicable customs duties such as CVD and SAD.

Import of Services

Defined as the supply of any service where:

• (a) The supplier is located outside India,
• (b) The recipient is in India, and
• (c) The place of supply is within India.

Under GST, imported services are treated as inter-state supplies, and the recipient in India is liable to pay IGST.

Exports

Export of Goods

Export of goods means taking goods from India to any location outside the country.

Export of Services

Defined as the supply of any service when:

• (a) The supplier is located in India,
• (b) The recipient is located outside India,
• (c) The place of supply is outside India,
• (d) Payment is received in convertible foreign exchange, and
• (e) The supplier and recipient are distinct establishments.

Note: All conditions must be met for services to be zero-rated under GST. If the place of supply is within India, GST will apply.

Input Tax Credit on Exports: A registered taxable person exporting goods or services can either claim a refund of the unutilized ITC or the IGST paid.

Composition Levy

Overview: The Composition Scheme is designed for small businesses with an annual turnover of less than Rs.50 lakhs. Under this scheme, tax is levied at a nominal rate (typically 1% or 2.50% for manufacturers for both CGST and SGST) and requires simplified record keeping and quarterly filing.

Important Points:

• Taxable invoices cannot be issued under this scheme, meaning tax is paid from the business’s funds.
• Businesses under this scheme cannot claim any input tax credit.
• This scheme is available only for small businesses—not for inter-state sellers, e-commerce traders, or operators.

For more detailed information, please refer to our dedicated article on the Composition Levy.

Mixed Supply and Composite Supply

Composite Supply

A composite supply comprises two or more goods or services that are naturally bundled and supplied together in the ordinary course of business. One component is the principal supply, and the items cannot be supplied separately.

Example: When goods are packed and transported along with insurance, packing materials, and transport services, the entire package is treated as a composite supply. Since insurance and transport cannot be provided separately, the GST rate applicable is that of the principal supply (the goods).

Mixed Supply

A mixed supply refers to two or more individual supplies of goods or services (or both) made together for a single price, where each item can be supplied separately.

Tax Treatment: The supply is treated as that of the item with the highest tax rate.

Example: A package containing canned foods, sweets, chocolates, cakes, dry fruits, an aerated drink, and fruit juices sold at one price is a mixed supply. If the aerated drink attracts the highest GST rate among the items, the entire package is taxed at that rate.

Final Thoughts

GST is a groundbreaking tax regime that is transforming the Indian fiscal landscape. The terms explained above—such as Place of Business, Imports, Exports, Composition Levy, and the concepts of Mixed and Composite Supply—are essential for understanding and complying with GST. We hope this comprehensive guide enhances your understanding of the practical implications of GST.

If you have any questions or need a tailored GST compliance solution, feel free to contact us at DisyTax. We’re here to help you navigate these changes with confidence.