GST, trade and inventory, explained plainly

GSTR-3B

Monthly summary GST return

GSTR-3B is the summary GST return in which a registered business declares its total outward supplies, claims input tax credit, and pays the net tax due for the period.

GSTR-1

Statement of outward supplies

GSTR-1 is the invoice-level statement of everything a business sold in a period, and it is what populates the buyer's GSTR-2B and therefore their ability to claim input tax credit.

E-way bill

Electronic way bill, EWB

An e-way bill is an electronic document that must be generated before goods above a threshold value are moved, and it must travel with the consignment for the whole journey.

E-invoice (IRN)

Invoice Registration Number

E-invoicing means reporting each B2B invoice to a government Invoice Registration Portal, which returns a unique 64-character Invoice Reference Number (IRN) and a signed QR code that make the invoice legally valid.

HSN code

Harmonised System of Nomenclature

An HSN code is an internationally standardised number that classifies a product for tax purposes, and the GST rate applicable to a sale follows from it.

Input tax credit

ITC

Input tax credit is the GST you paid on business purchases, which you set off against the GST you collected on sales, so that tax applies only to the value you added.

Reverse charge mechanism

RCM

Reverse charge means the recipient pays the GST to the government instead of the supplier collecting it, which applies to specified supplies and to most imports of services.

Composition scheme

The composition scheme lets small businesses pay GST at a flat percentage of turnover with minimal returns, in exchange for giving up input tax credit and the ability to charge GST to customers.

GSTIN

Goods and Services Tax Identification Number

A GSTIN is the 15-character registration number identifying a business in a particular state under GST, built from the state code, the PAN, and an entity and check digit.

Debit note and credit note

A credit note reduces the value of an already-issued tax invoice and a debit note increases it, and both must be reported under GST so the corresponding tax adjustment is traceable.

Letter of Undertaking

LUT, Form GST RFD-11

A Letter of Undertaking is a declaration filed on the GST portal that lets an exporter ship goods or services without paying IGST upfront, instead of paying it and claiming a refund.

EDPMS

Export Data Processing and Monitoring System

EDPMS is the Reserve Bank of India's system that tracks every export shipping bill until the foreign exchange proceeds are received, and flags exporters whose bills remain unrealised beyond the permitted period.

FIRC

Foreign Inward Remittance Certificate

An FIRC is the certificate an authorised dealer bank issues confirming that a specific sum of foreign currency was received from abroad, and it is the primary proof of realisation for an export.

BRC

Bank Realisation Certificate

A Bank Realisation Certificate is a bank-issued confirmation that payment for a specific export shipping bill has been received, and it is the document DGFT-linked export incentive schemes are claimed against.

IEC

Importer Exporter Code

An Importer Exporter Code is the ten-digit identifier issued by the DGFT that a business must hold to import into or export from India, and it is now the same as the entity's PAN.

AD Code

Authorised Dealer Code

An AD Code is a fourteen-digit number identifying the bank branch that handles a business's foreign exchange, and it must be registered at each port the business ships from before any shipping bill can be filed there.

Bill of Entry

BoE

A Bill of Entry is the customs declaration filed for imported goods, and the IGST paid on it is what an importer claims as input tax credit.

Duty drawback and RoDTEP

Duty drawback refunds customs duty paid on inputs that were used to make exported goods, and RoDTEP separately rebates embedded central, state and local levies that no other scheme refunds.

Incoterms

Incoterms are standard three-letter trade terms published by the International Chamber of Commerce that define, for a given shipment, where the seller's responsibility for cost and risk ends and the buyer's begins.

Letter of credit

LC, documentary credit

A letter of credit is an undertaking by the buyer's bank to pay the seller once the seller presents documents that comply exactly with the credit's terms, substituting the bank's creditworthiness for the buyer's.

Landed cost

Landed cost is the total cost of getting a product to your warehouse — purchase price plus freight, insurance, customs duty, clearing charges and internal transport — as opposed to the invoice price alone.

Weighted average cost

WAC

Weighted average cost values stock at the average cost of all units on hand, recalculated each time new stock is received, rather than tracking the cost of each individual batch.

Safety stock and reorder point

Safety stock is the buffer held to absorb variation in demand and supplier lead time, and the reorder point is the stock level at which a replenishment order must be placed to avoid running out before it arrives.

Stock transfer

Branch transfer

A stock transfer is a movement of goods between two locations of the same business, and under GST a transfer between locations registered under different GSTINs is a taxable supply even though no sale has taken place.

Delivery challan

A delivery challan is the document accompanying goods that are moved without a sale taking place — a branch transfer, goods sent for job work, or items sent on approval.

TDS under section 194Q

Section 194Q requires a buyer with turnover above ₹10 crore to deduct 0.1% tax at source on the value of goods purchased from any single seller beyond ₹50 lakh in a financial year.

TCS on sale of goods (206C(1H))

Withdrawn from 1 April 2025

Section 206C(1H) required sellers above ₹10 crore turnover to collect 0.1% tax from buyers on receipts above ₹50 lakh, and it stopped applying from 1 April 2025.