Finance & Tax Glossary for Indian Businesses

GST & indirect tax

GST (Goods and Services Tax): India’s unified indirect tax on the supply of goods and services. Most registered businesses charge GST on sales (output tax) and claim credit for GST paid on purchases (input tax), paying the government only the difference.
Input Tax Credit (ITC): The GST you paid on business purchases, which you can set off against the GST you collect on sales — so you don’t pay tax twice on the same value. ITC can usually be claimed only if your supplier has actually reported the invoice.
GSTR-1: The monthly or quarterly return in which you report all your outward supplies (sales) invoice-by-invoice. It feeds your buyers’ input-credit statements.
GSTR-3B: The summary GST return where you declare total sales, total input credit claimed, and the net tax you actually pay for the period.
GSTR-2B: A static, auto-generated statement of the input credit available to you, built from what your suppliers filed. Reconciling your purchases against GSTR-2B is how you avoid claiming credit you aren’t entitled to.
Reverse Charge (RCM): A situation where the buyer — not the supplier — is liable to pay GST to the government, e.g. on certain notified goods, services, or purchases from unregistered dealers.
E-way bill: An electronic document required for the movement of goods above a threshold value, generated on the NIC portal before transport begins.
E-invoice / IRN: For businesses above a turnover limit, B2B invoices must be reported to the Invoice Registration Portal, which returns a unique Invoice Reference Number (IRN) and a signed QR code.
HSN / SAC code: Standard classification codes — HSN for goods, SAC for services — that determine the correct GST rate and must be quoted on invoices.

TDS & direct tax

TDS (Tax Deducted at Source): Income tax withheld by the payer at the time of certain payments — salary, rent, professional fees, contractor bills — and deposited with the government against the recipient’s PAN.
TCS (Tax Collected at Source): Tax collected by the seller from the buyer on certain specified transactions, and deposited with the government — the mirror image of TDS.
Form 26AS: A consolidated annual tax statement, linked to your PAN, showing all TDS/TCS credited to you, advance tax paid, and high-value transactions. It’s what you reconcile your books against at year-end.
Form 16 / 16A: TDS certificates: Form 16 is issued to employees for tax deducted on salary; Form 16A covers TDS on non-salary payments such as rent, interest or professional fees.
Advance Tax: Income tax paid in instalments during the year (rather than in one lump sum at the end) when your estimated liability crosses a threshold. Missing instalments attracts interest.
PAN / TAN: PAN is the permanent account number identifying a taxpayer; TAN is the separate number a business needs specifically to deduct and deposit TDS.

Cash, working capital & CFO

Working Capital: The money tied up in running the business day-to-day — roughly current assets (stock + receivables + cash) minus current liabilities (payables). Too little strains cash; too much means money is idle.
Cash flow vs Profit: Profit is what you earn on paper; cash flow is what actually moves in and out of the bank. A profitable business can still run out of cash if customers pay slowly or stock piles up — which is why both matter.
Receivables (Debtors): Money your customers owe you for sales already made but not yet paid for. The longer it stays unpaid, the more cash is stuck outside the business.
Payables (Creditors): Money you owe your suppliers for purchases you’ve received but not yet paid for.
DSO (Days Sales Outstanding): The average number of days it takes to collect payment after a sale. A rising DSO is an early warning that cash is getting stuck in receivables.
DPO (Days Payable Outstanding): The average number of days you take to pay your suppliers. Used with DSO to understand your cash cycle.
Cash Conversion Cycle (CCC): How many days it takes for a rupee spent on stock and suppliers to come back as cash from customers. Shorter is healthier: CCC ≈ inventory days + DSO − DPO.
EBITDA: Earnings before interest, tax, depreciation and amortisation — a common proxy for the operating profitability of the business before financing and accounting effects.
Runway & Burn: Burn is how much cash the business consumes each month; runway is how many months of cash you have left at the current burn before you need to raise or turn profitable.

Statements, audit & compliance

Trial Balance: A listing of every ledger’s closing balance at a date, with total debits equal to total credits. It’s the raw material from which the P&L and Balance Sheet are built.
Profit & Loss (P&L): The statement of income and expenses over a period, ending in profit or loss. Also called the income statement.
Balance Sheet: A snapshot at a point in time of what the business owns (assets), owes (liabilities) and the owners’ stake (equity). Assets always equal liabilities plus equity.
Schedule III: The format prescribed under the Companies Act, 2013 in which companies must present their Balance Sheet, P&L and notes — so financial statements are comparable and complete.
Depreciation: The systematic spreading of the cost of a long-lived asset (machinery, vehicles, computers) over the years it is used, instead of expensing it all at once.
CARO 2020: The Companies (Auditor’s Report) Order — a set of specific matters an auditor must comment on in the audit report of most companies, covering assets, loans, statutory dues and more.
Reconciliation: Matching two independent records of the same thing — books vs bank statement, books vs GSTR-2B, books vs Form 26AS — to find and explain every difference.
Ledger & Voucher: A voucher is the record of a single transaction (a sale, a payment, a journal entry); a ledger is the running account for one head (a customer, an expense, a bank) built from all its vouchers.

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