Key takeaways
What this article covers, in order:
- How is a trader's GST different?
- When does a trader need to register?
- HSN codes on your invoices
- Worked example: Gupta Hardware Traders, Ludhiana
- Where traders leak credit
- E-way bills, briefly
You bought ₹18 lakh of stock last month, sold ₹20 lakh, and your margin is about ₹2 lakh. For a trader, GST is really a game of credits: you collect tax on sales, take credit for tax on purchases, and pay the small difference. Get the credits right and GST is cheap. Get them wrong and it eats your margin. HelloBooks files GSTR-1 and GSTR-3B for one GSTIN free, directly to the GST portal. For a trader, though, the real question is volume, so we'll come to that.
How is a trader's GST different?
A retailer sells to consumers who don't care about GST. A wholesaler sells to other businesses who care a great deal, because your invoice is their input credit. That changes a few things.
First, your GSTR-1 is your customers' GSTR-2B. If you file late or put a wrong GSTIN on an invoice, your buyer can't claim their credit. A distributor who's always late soon becomes a distributor nobody wants to buy from.
Second, margins are thin, so ITC is your profit. On a 10% margin, losing ITC on one ₹1 lakh purchase at 18% (₹18,000) can wipe out the profit on ₹1.8 lakh of sales.
Third, goods move. Consignments over ₹50,000 need an e-way bill, and inter-state movement makes IGST the norm.
When does a trader need to register?
If you supply only goods, you must register once aggregate turnover crosses ₹40 lakh in most states (₹20 lakh in some, ₹10 lakh in the special category states). But if you make any inter-state sale of goods, registration is compulsory regardless of turnover. Most wholesalers buy from or sell to another state at some point, so in practice they're registered early.
Composition is open to traders up to ₹1.5 crore at 1% of taxable turnover. A wholesaler selling to registered businesses rarely chooses it, though. Composition dealers can't charge GST, can't pass on credit, and can't sell inter-state.
HSN codes on your invoices
How many HSN digits you need depends on your aggregate turnover in the previous year:
| Previous-year turnover | HSN digits required |
|---|---|
| Up to ₹5 crore | 4 digits on B2B invoices (B2C optional) |
| Above ₹5 crore | 6 digits on all invoices |
GSTR-1 also has a HSN-wise summary table, split between B2B and B2C. If your item master has sloppy HSN codes, this table becomes a monthly headache. Clean it once and it stays clean. GST 2.0 on 22 Sep 2025 moved many products between slabs (most went to 5% or 18%), so a trader carrying an item master from before that date should check every rate.
Worked example: Gupta Hardware Traders, Ludhiana
Sunil Gupta runs a wholesale hardware business in Punjab. He buys from manufacturers in Gujarat and Maharashtra and sells to retailers in Punjab and Himachal. Here's Nov 2026 (illustrative):
Purchases (all appearing in GSTR-2B)
| From | Taxable value | GST |
|---|---|---|
| Gujarat manufacturer (IGST 18%) | ₹10,00,000 | ₹1,80,000 IGST |
| Maharashtra supplier (IGST 18%) | ₹4,00,000 | ₹72,000 IGST |
| Local packaging and transport (CGST + SGST) | ₹50,000 | ₹9,000 |
Sales
| To | Taxable value | GST |
|---|---|---|
| Punjab retailers (CGST 9% + SGST 9%) | ₹11,00,000 | ₹99,000 + ₹99,000 |
| Himachal retailers (IGST 18%) | ₹5,00,000 | ₹90,000 IGST |
Output tax is ₹2,88,000. ITC is ₹2,52,000 of IGST plus ₹4,500 CGST and ₹4,500 SGST, so ₹2,61,000 in total.
Now the set-off order. IGST credit goes against IGST liability first: ₹2,52,000 against ₹90,000, leaving ₹1,62,000 of IGST credit. That leftover is then used against CGST and SGST liability. After the CGST and SGST credits are used too, the cash payable comes to roughly ₹27,000. The portal's set-off screen in GSTR-3B decides the exact CGST/SGST split.
His margin before costs is about ₹1.5 lakh on ₹16 lakh of sales. That ₹27,000 is only that low because every one of his purchase invoices is sitting in GSTR-2B. If the Gujarat supplier had filed late, he'd be paying ₹1,80,000 more in cash this month and waiting to claim it later.
GSTR-1 is due 11 Dec 2026 and GSTR-3B 20 Dec 2026.
Where traders leak credit
The 180-day payment rule
If you don't pay a supplier within 180 days of the invoice date, Rule 37 says you must reverse the ITC (and pay interest) until you do pay. Wholesalers who stretch suppliers on credit should watch this closely.
Discounts
A trade discount shown on the invoice simply reduces the taxable value. A post-sale discount, such as a quarterly turnover rebate, reduces GST only if it was agreed in advance and is passed through a GST credit note, with the buyer reversing the matching ITC. Otherwise the discount happens outside GST and your output tax stays where it was. Many schemes now come as "financial credit notes" without GST, and they don't touch your credit.
Invoices your buyers reject
Since the Invoice Management System (IMS) went live on the GST portal, buyers can accept, reject or hold the invoices you upload. A rejected credit note can push your output tax up. Talk to your big buyers before you issue credit notes, so they don't get rejected.
Suppliers who never file
Run GSTR-2B reconciliation every month, before GSTR-3B. Any invoice in your books that isn't in 2B is credit you can't take yet.
E-way bills, briefly
You need an e-way bill to move goods worth over ₹50,000 per consignment. For movement within a state, some states set their own limits. Wholesalers deal with this daily, and job-work and some other movements have special rules.
HelloBooks Free doesn't generate e-way bills. Pro (₹499/month) does, along with e-invoicing, which becomes mandatory once your aggregate turnover crosses ₹5 crore. See our e-way bill and e-invoicing pages.
Free plan or Pro: let's count your invoices
Free covers 200 transactions a year. A wholesaler raising 10 sales invoices a week and receiving 5 purchase bills a week will hit about 780 a year. Free won't stretch that far.
Where Free fits a trader:
- A small trading firm or commission-based trader with a few large invoices a month
- A newly registered trader who wants to see GSTR-1 and GSTR-3B filing work end to end before committing
For an active wholesaler, Pro at ₹499/month is the sensible plan. It's built for exactly this: unlimited transactions, e-way bills, e-invoicing, unlimited users for your billing staff, every GSTIN of your entity if you open a branch in another state, and Tally sync if your CA still works in Tally. The pricing page has the full list.
How HelloBooks helps
HelloBooks files GSTR-1 and GSTR-3B directly to the GST portal from inside the app. GSTR-2B reconciliation highlights missing supplier invoices before you file 3B. AP and AR aging reports show which supplier bills are approaching the 180-day mark. Bank statement import matches receipts and payments against invoices. Before you file 3B, you see the portal's own interest and late fee if you're late. And your CA works in the same books.
FAQs
Does a trader need GST if they sell to another state?
Yes. An inter-state supply of goods requires registration whatever your turnover.
How many HSN digits must a wholesaler use?
Four digits on B2B invoices if last year's turnover was up to ₹5 crore, and six digits on all invoices above that.
What if I pay my supplier after 180 days?
You must reverse the ITC on that invoice, with interest, and you can re-claim it once you pay. Ask a CA to help with the entries if it's a large amount.
Does HelloBooks Free generate e-way bills?
No. E-way bills and e-invoicing are part of Pro at ₹499/month.
Is HelloBooks Free enough for a wholesaler?
Usually not for an active one, because of the 200-transactions-a-year limit. It works for small or new trading firms with few invoices.
A trader who reconciles GSTR-2B every month rarely gets an unpleasant surprise from GST. Start with that habit.
Start free — GST filing included, no card. Try HelloBooks Free
