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Definitions related to Goods and Services Tax (GST)

Below are some important definitions that a person needs to know related to Goods and Services Tax (GST) in India

Composite Supply under GST

A composite supply means a supply of goods and/or services or a combination of both, which is naturally bundled together and supplied with each other one of which is a principal supply.

Mixed Supply under GST

A mixed supply means a combination of two or more goods or services for a single price. Each of the goods or services can be supplied separately and is not dependent on any other.

Concept of an Intermediary under GST

A person who only arranges or facilitates the supply of goods and/or services between two or more persons but does not supply the goods and/or services on his own account is known as an intermediary. The place of supply of intermediary services is the location of supplier of such services.

Advance Ruling under GST

A taxpayer under GST has an option to seek an advance ruling in a scenario where there is uncertainty in the law. An advance tax ruling is applicable on:

  1. Classification of goods/services under GST
  2. Applicability of a notification which may affect the rate of tax
  3. Determination of the time and value of the supply of goods/services
  4. Whether ITC will be eligible to be claimed
  5. Liability to pay tax on any goods/services
  6. Requirement for obtaining registration under GST
  7. An activity in relation to goods/services by the applicant will qualify as a supply

Anti-Profiteering under GST

Suppliers of goods and services are required to pass on the benefit of reduction in the rate of tax (if any) or the benefit of ITC to the recipients by way of reduction in prices. The act of not passing on the benefits to recipients is known as “profiteering”.

GST Compensation Cess under GST

States were initially apprehensive of not earning as much revenue under the GST regime as they were earning under the erstwhile indirect tax laws. The Central Government guaranteed the state governments minimum tax revenue for states for obtaining their consent for transitioning to the GST regime and pass their own respective State GST laws. This minimum tax revenue is known as GST Compensation Cess and will be provided by the Central Government to the State Governments for 5 years. The cess is applicable only on certain products.

Input Tax Credit under GST

Input tax credit is the reduction on the tax on inputs which has already been paid. Where goods/ services have been availed after due payment of taxes on them and receipt of respective invoice, an entity becomes eligible to avail input tax credit.

IGST under GST

The Integrated GST (hereinafter referred to as “IGST”) is the GST which will be levied by Central Government on inter-State supply of goods and services. Tax gets transferred to Importing state. 

Input Tax under GST

Input tax is the Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Integrated Goods and Services Tax (IGST) or Union territory Goods and Services Tax (UTGST) charged on supply of goods or services.

It also includes the tax paid under reverse charge mechanism including the IGST charged on the import of goods from outside India.

Tax paid under composition scheme is not included under input tax.

Inter-State and Intra-State Supply under GST

The component of tax under GST (i.e. CGST, SGST/UTGST or IGST) will be applicable on whether the supply of goods and/or services is an intra-state supply or inter-state supply in Indoa. Both supplies have been briefly explained below:

Intra – state supply

The supply of goods / services qualifies as an intra-state supply when the location of the supplier of goods/services and the place of supply of the customer are in the same State or Union territory.

Inter – state supply

The supply of goods/services qualifies as an inter-state supply when the location of the supplier of goods/services and the place of supply of the customer are in:

  • Two different States; or
  • Two different Union territories; or
  • State and a Union territory

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