India's Goods and Services Tax replaced a maze of central and state taxes with a single system in 2017 — but "single" is doing a lot of work in that sentence. GST has its own vocabulary (GSTIN, HSN, CGST, SGST, IGST, ITC), its own invoice rules, and a return cycle that punishes messy books. This guide explains the moving parts in plain language, and what they mean for how you record transactions day to day.
GSTIN: your tax identity, per state
A GSTIN is a 15-character registration number, and the detail that surprises people is that it's state-wise: a business operating from Karnataka and Maharashtra registers in each state and holds a GSTIN for each. The number itself encodes the state (first two digits) and your PAN (next ten characters).
For your bookkeeping this means the "who" on an invoice is really "who, where": your GSTIN, your customer's GSTIN (for B2B sales), and — crucially — the place of supply, because that's what decides how the tax splits.
The split: CGST + SGST, or IGST
Every GST charge is one of two shapes, decided by whether the supply crosses a state border:
- Within a state (intra-state): the tax splits into two equal halves — CGST (to the centre) and SGST (to the state). An 18% sale becomes 9% CGST + 9% SGST, shown as separate lines on the invoice and posted to separate liability accounts.
- Across states (inter-state): the whole amount is IGST, collected by the centre. The same 18% sale is a single 18% IGST line.
The rate is identical either way — what changes is the accounting. Your books need separate running balances for CGST, SGST, and IGST, on both the output side (what you charged) and the input side (what you paid), because the return reports them separately and the set-off rules between them are specific. A system that lumps "GST" into one account produces books that cannot be filed from.
HSN and SAC codes: classifying what you sell
GST rates attach to what is being sold, and the classification system is:
- HSN codes (Harmonized System of Nomenclature) for goods — an international commodity classification
- SAC codes (Services Accounting Codes) for services
Depending on your turnover, invoices must show HSN/SAC digits per line, and your GSTR-1 return summarises sales by these codes. Common rate slabs are 0%, 5%, 12%, 18%, and 28%, and the code determines the slab.
The practical discipline: put the HSN/SAC and rate on the product record, once, so every invoice line inherits it. Classifying at invoice time — from memory, per sale — is how the same item ends up sold at three different rates by three different staff. This is the same master-data hygiene we preach for e-invoicing readiness: fix the record, not each document.
Input tax credit: where good books pay you back
ITC (input tax credit) is GST's engine: the GST you pay on business purchases offsets the GST you collect on sales, and you remit the difference. It's the same collect-and-recover flow as any VAT system — with one very Indian twist: matching.
Your claimable credit is tied to what your suppliers reported. Their GSTR-1 filings populate your GSTR-2B statement, and credits you claim are expected to reconcile against it. A supplier who bills you but doesn't file becomes your problem. In practice this means:
- Record every purchase with the supplier's GSTIN and the tax split, at entry time.
- Reconcile your recorded input GST against GSTR-2B each period, and chase the gaps.
- Keep the paper trail — the invoice behind every credit — attached and findable.
The return cycle, briefly
The core rhythm for most businesses: GSTR-1 (outward supplies — your sales, invoice by invoice for B2B), and GSTR-3B (the monthly summary where tax is actually paid), with an annual return on top. E-invoicing — reporting B2B invoices to the government's IRP portal for a signed IRN — applies above a turnover threshold that has been lowered steadily over the years.
Notice what all of these consume: line-level, coded, GSTIN-tagged transaction data. None of it can be reconstructed reliably at month-end from a bank statement and memory. The return is only ever as good as the day-to-day records behind it.
How BIZA helps
BIZA is a full ERP with India GST support in the core: GSTINs on your business and your customers, HSN/SAC and rates on product records, automatic CGST/SGST vs IGST treatment from place of supply, separate tax ledgers that keep the splits clean, ITC tracked from purchases and AI-captured supplier invoices, and period summaries shaped the way returns expect.
See BIZA for India and our finance and accounting features, or talk to the team.
This guide is general information, not tax advice — thresholds and rules change; confirm specifics with your CA.