Understanding these five key terms is the first step to mastering GST. Let’s break them down with simple examples.

1. Taxable Supply

This is the most common type of supply under GST.

• Simple Meaning: Any sale of goods or services on which you must pay GST to the government.
• Key Point: It can be at a standard rate (like 5%, 12%, 18%), a special rate, or even 0%.
• Why it Matters: You can claim Input Tax Credit (ITC) on the purchases you made to make this taxable supply.

Example:

• A manufacturer sells shoes to a retailer for ₹1,000 + ₹180 GST. This is a Taxable Supply. The manufacturer collects ₹180 from the retailer and pays it to the government.

2. Non-Taxable Supply

This refers to goods or services that are completely outside the scope of GST.

• Simple Meaning: Items on which no GST is charged at all because the law does not tax them.
• Key Point: This is different from a “zero-rated supply” (like exports). Non-taxable means GST law doesn’t apply.
• Why it Matters: You cannot charge GST to your customer, and you cannot claim ITC on any purchases related to this supply.

Example:

• Selling petrol or alcoholic liquor for human consumption. These are intentionally kept outside GST. If you are a petrol pump owner, you sell petrol without charging GST.

3. Inward Supply

Think of this from the buyer’s perspective.

• Simple Meaning: Any purchase of goods or services that you receive. It’s what is coming inward into your business.
• Key Point: It’s the transaction where you are the recipient or the buyer.
• Why it Matters: For most inward supplies, you are eligible to claim ITC (provided they are for business use and other conditions are met).

Example:

• A restaurant buys vegetables, spices, and cooking gas. For the restaurant, these are Inward Supplies. The GST it pays on these purchases is its Input Tax Credit.

4.  Intra-State Supply (Within State)

This is all about location.

• Simple Meaning: When the seller and the buyer are located in the same state (or Union Territory).
• Key Point: In this case, both CGST (Central GST) and SGST (State GST) are applicable.
• Why it Matters: You must file the tax revenue correctly between the central and state governments.

Example:

• A dealer in Mumbai, Maharashtra sells goods to a customer in Pune, Maharashtra. This is an Intra-State Supply. If the GST rate is 18%, it will be split as 9% CGST and 9% SGST.

5. Inter-State Supply (Between States)

This is the opposite of Intra-State supply.

• Simple Meaning: When the seller and the buyer are located in two different states (or Union Territories).
• Key Point: In this case, only IGST (Integrated GST) is applicable.
• Why it Matters: It simplifies the tax process for transactions across state lines, as only one tax is involved.

Example:

• A dealer in Chennai, Tamil Nadu sells goods to a customer in Bangalore, Karnataka. This is an Inter-State Supply. The entire GST, say 18%, will be charged as IGST.

Quick Summary Table

Conclusion:

Imagine you are a business owner in Delhi.

• You buy raw materials from a supplier in Gujarat. This is an Inward Supply for you and an Inter-State Supply for the seller (IGST is charged). You can claim this IGST as ITC.
• You use these materials to make a product.
• You then sell the product to a customer in Delhi. This is a Taxable Supply and an Intra-State Supply (you charge CGST+SGST).
• You use the ITC from your inward supply (the IGST you paid) to pay the GST on your outward supply (the CGST+SGST you collected).