Term Business to business under GST

Meaning of term Business to business under GST


In this article, the information about Business to business is explained.

Business to business (B to B):

Business to business, also called B to B or B2B, is a type of transaction that exists between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer.

Impact of GST in B2B Commerce

The Government of India is working overtime to bring in the GST or Goods and Service Tax reform to the Union of India by the target date of 1st April 2017. While the bill has been ratified by the Parliament of India and the requisite number of states a lot of work needs to be done to put into place the rules and procedures as well as the much talked about Goods and Service Tax Network or GSTN which would implement the core IT platform to connect databases of states with the database of the centre.

India has a history of complex indirect taxation structure with a multitude of taxes such as Excise Duties, SAD, AED, VAT, Entry Tax, Luxury Tax, Service Tax, cesses, etc. The tax reforms carried out in the last few decades has introduced the concept of input tax credits but since indirect taxes are levied by both the centre and states the tax credits did not flow seamlessly resulting in cascading effect.

The major impact of the dual tax system was in inter-state trade where Central Sales Tax is levied which cannot be claimed as input credit and becomes a cost to the consumer. This resulted into complex distribution structures where state wise dealers were introduced to whom manufacturers could transfer inventories with nil tax and then those dealers would sell to local consumers with the local VAT which could be claimed as input credit. In this structure, however, a manufacturer who was selling majority of its products outside the state could not claim full input credits on the purchases it made.

When both, Supplier and Recipient are registered taxpayers, Tax invoice shall be issued consisting of

  1. Tax Invoice Number and Date
  2. Name, address and GSTIN of the Supplier
  3. Name, address and GSTIN of the Recipient
  4. Description of Goods and/or Services
  5. Quantity, Value and Taxable Value
  6. Rate of Tax of CGST, SGST and Cess or IGST and Cess to be shown separately, as applicable
  7. Amount of Tax of CGST, SGST and Cess or IGST and Cess to be shown separately, as applicable
  8. In case of  inter-State supply, place of delivery and place of supply
  9. Signature / Digital Signature of the Supplier.

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