B2B Trade Glossary
Every Indian B2B buyer and supplier should understand these terms before their first transaction. Plain language, no jargon.
India's B2B trade landscape uses terminology drawn from GST compliance, MSME policy, banking regulations, and international trade law. Terms like HSN codes, IGST, Letter of Credit, and Purchase Order carry specific legal and financial meaning that directly affects how deals are structured, how taxes are filed, and how disputes are resolved.
This glossary covers the vocabulary every buyer and supplier on the VyaparSethu Trade Network encounters — from posting a Requirement and receiving quotes to completing a deal under Protected Payment. Each definition links to a full explanation with examples, common mistakes, and how the term applies to MSME transactions specifically.
Why B2B Terminology Matters
Misunderstanding terms like FOB, CIF, or credit period can cost lakhs in bad deals. A buyer who does not know the difference between EXW and DDP may end up paying unexpected freight and customs charges. A supplier who misquotes MOQ may lose a large order. Use this glossary to compare quotes accurately, set clear payment terms, and protect your business with legally sound agreements.
India's B2B trade landscape carries specific legal and financial meaning in every term — from how GST input tax credit flows between registered businesses to how Udyam numbers determine MSME lending eligibility. Understanding these terms before your first transaction protects small-scale MSME owners from payment defaults, bad debts, and non-compliance penalties under the Indian DPDP Act, 2023.
Essential Terms
RFQ — Request for Quotation
A Request for Quotation is a formal document a buyer sends to multiple suppliers asking for price, lead time, and payment terms before placing an order. A good RFQ includes the product name, specification, quantity, delivery location, required date, and any quality certifications needed. On VyaparSethu, an RFQ is called a “Requirement” and can be posted by voice, video, or text in under 90 seconds.
MOQ — Minimum Order Quantity
The smallest quantity a supplier is willing to sell in a single order. MOQ exists because suppliers have fixed setup costs — a dye house may set MOQ at 500 metres of fabric because any smaller run is uneconomical. Always clarify MOQ before finalising a supplier, especially for custom or manufactured products. On VyaparSethu, suppliers include their MOQ in every Quotation so buyers can compare directly.
GST — Goods and Services Tax
India's unified indirect tax system that replaced VAT, excise duty, and service tax in July 2017. B2B transactions between GST-registered businesses allow Input Tax Credit (ITC) claims — the tax you pay on purchases offsets the tax you collect on sales, making GST cost-neutral for registered businesses. Always confirm your supplier's GSTIN before placing a large order, and ensure invoices carry the correct HSN code, CGST/SGST or IGST breakdown, and both parties' GSTINs.
HSN Code — Harmonised System of Nomenclature
A 6–8 digit international product classification code used on all B2B GST invoices to determine the applicable tax rate. Getting the HSN code wrong means the wrong GST rate is applied, which can trigger audit notices and disallow your ITC claim. Businesses with turnover above ₹5 crore must use 6-digit HSN codes on all invoices. Use VyaparSethu's free HSN Code Lookup tool to find the correct code for any product.
Udyam Registration
The Indian government's official MSME registration system, replacing the old Udyog Aadhaar from July 2020. Registered on udyamregistration.gov.in using Aadhaar and PAN — free and paperless, with no documents to upload. Suppliers with a valid Udyam Registration Number (URN) are legally recognised MSMEs and eligible for collateral-free loans, government tender quotas, and protection under the MSMED Act's 45-day payment rule. On VyaparSethu, Udyam numbers are verified against the government database before a supplier profile goes live.
Purchase Order (PO)
A legally binding commercial document issued by a buyer to a supplier, confirming the agreed product, quantity, price, delivery date, and payment terms. Once the supplier accepts a PO, it becomes a contract. A proper PO protects both parties: the buyer cannot later claim a different price, and the supplier has documented proof of the order to pursue payment if delayed. In Indian B2B trade, verbal orders frequently lead to disputes — always issue a written PO before production begins.
Credit Period
The number of days a supplier allows a buyer to pay after receiving goods, written as “Net 30”, “Net 60”, etc. Common credit periods in Indian B2B trade range from 15 to 90 days. For MSME suppliers, the MSMED Act caps this at 45 days — buyers who pay late owe compound interest at 3× the RBI base rate. Always confirm credit terms in writing before placing an order to avoid disputes later.
Lead Time
The total time between placing an order and receiving the goods at your location, including manufacturing, quality checks, packaging, and shipping. For custom-made products, lead time can range from 2 days to 8 weeks. For stock items, it is often 1–5 days for domestic supply. Always confirm lead time before committing to a supplier, especially for project-linked procurement with fixed deadlines.
FOB — Free on Board
An Incoterm (international trade term) that defines where the supplier's responsibility ends and the buyer's begins. FOB means the supplier is responsible for getting goods onto the vessel at the origin port. From that point, the buyer bears freight, insurance, and risk. In Indian domestic trade, “ex-works” (EXW) is more common — the buyer arranges their own transporter from the supplier's factory gate. Always clarify delivery terms in your Requirement to get comparable quotes.
MSME — Micro, Small and Medium Enterprise
India's official classification for businesses with investment and turnover below prescribed limits (Micro: turnover ≤ ₹5 cr; Small: ≤ ₹50 cr; Medium: ≤ ₹250 cr). MSME status unlocks priority bank lending, 25% government procurement quotas, and legal protection for delayed payments. Register free on udyamregistration.gov.in. On VyaparSethu, verified MSMEs receive a badge visible to buyers — which increases quote shortlisting rates significantly.
OEM — Original Equipment Manufacturer
A company that manufactures products or components that are then sold under another brand's label. In B2B trade, buyers often request OEM manufacturing — they provide the design, branding, and specifications, and the OEM produces to those exact requirements. Distinct from an ODM (Original Design Manufacturer), where the manufacturer also owns the product design. When posting a Requirement on VyaparSethu, specifying “OEM required” filters for suppliers capable of custom manufacturing under your brand.
Protected Payment
VyaparSethu's payment mechanism where the buyer's funds are held securely via Razorpay's regulated nodal account until the supplier delivers and the buyer confirms receipt. Protects buyers from advance payment fraud — the supplier receives funds only after successful delivery. Protects suppliers from buyers who place orders and disappear — payment is already committed. All transactions on VyaparSethu are covered by Protected Payment by default on first-time supplier relationships.
Glossary — Frequently Asked Questions
What is the difference between an RFQ and a Purchase Order?
An RFQ (Requirement) is sent to multiple suppliers asking for their price and terms — it is a request, not a commitment. A Purchase Order is issued to one selected supplier after you have chosen their quote — it is a legally binding commitment to buy at the agreed price and terms.
What is the difference between a Manufacturer, Supplier, and Distributor?
A Manufacturer makes the product from raw materials or components. A Supplier is a broad term for any entity in the supply chain that provides goods — it can be a manufacturer, trader, or importer. A Distributor buys in bulk from manufacturers and resells to smaller buyers, typically covering a specific geography. For the best B2B prices, buy directly from the manufacturer when possible.
What is the difference between FOB and EXW?
EXW (Ex-Works) means the buyer collects goods from the supplier's premises and bears all onward cost and risk. FOB (Free on Board) means the supplier delivers goods to the ship at the origin port — from that point, the buyer takes responsibility. For domestic Indian trade, EXW is most common. For exports, FOB is the standard baseline.
How do I verify a supplier before placing an order?
Verify the supplier's GSTIN on the government GST portal (search.gst.gov.in) to confirm their legal name and active registration. Check their Udyam Registration if they claim MSME status. Request sample invoices to verify GST invoice format compliance. On VyaparSethu, GST and Udyam verification is done automatically during supplier onboarding — every verified supplier carries a trust badge on their profile.
What does “Net 30” mean in a B2B invoice?
Net 30 means the buyer must pay the invoice within 30 days of the invoice date or goods receipt (whichever is specified). Other common terms are Net 15, Net 45, and Net 60. For MSME suppliers, the maximum credit period under the MSMED Act is 45 days. Always confirm payment terms in writing on the Purchase Order before the supplier begins production or delivery.
Business Registration
What is MSME?
Micro, Small and Medium Enterprise — India's official classification for businesses below ₹250 crore turnover that unlocks priority credit, govt tenders, and subsidies.
Read definition →What is Udyam Registration?
The official free digital certificate that classifies a business as Micro, Small, or Medium (MSME). Replaced the old Udyog Aadhaar system in July 2020.
Read definition →Taxation & Compliance
What is HSN Code?
Harmonised System of Nomenclature — a 6–8 digit international product classification code used in GST invoices to determine the correct tax rate.
Read definition →What is GST?
Goods and Services Tax — India's unified indirect tax that replaced excise duty, VAT, and service tax in July 2017. Applies to all B2B transactions above ₹40 lakh turnover.
Read definition →What is a GST Invoice (Tax Invoice)?
A tax invoice is the mandatory legal document issued by a GST-registered supplier at the time of supply. It enables the buyer to claim Input Tax Credit (ITC).
Read definition →Procurement
What is RFQ (Request for Quotation)?
A Request for Quotation is a formal document a buyer sends to suppliers asking for price, lead time, and terms — the first step in any B2B procurement. On VyaparSethu it's called a "Requirement".
Read definition →What is a Purchase Order (PO)?
A Purchase Order is a legally binding commercial document a buyer issues to a supplier confirming the agreed product, quantity, price, delivery date, and payment terms.
Read definition →What is a Pro Forma Invoice?
A preliminary invoice sent before goods are dispatched. It confirms price, quantity, and terms — used to get buyer approval and arrange advance payment or LC.
Read definition →Payments & Finance
What is Escrow Payment (Protected Payment)?
An escrow holds the buyer's payment with a neutral third party until the supplier delivers as agreed — eliminating advance payment fraud in B2B trade. VyaparSethu calls this "Protected Payment".
Read definition →What is Trade Credit?
An arrangement where a supplier allows the buyer to pay 30–90 days after receiving goods — the most common form of short-term business financing in India.
Read definition →What is a Letter of Credit (LC)?
A bank-issued guarantee that a buyer's payment will be made to the seller on time and for the correct amount — the gold standard for international and large domestic B2B transactions.
Read definition →Trade
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