Understanding GST in India
Goods and Services Tax (GST) is India's unified indirect tax system, replacing multiple central and state levies with a single framework. Every registered supplier charges GST on taxable supplies, collects it from customers, and remits the net liability to the government after adjusting input tax credit. Whether you run a shop, offer professional services, or sell online, understanding how GST is calculated helps you price products correctly and stay compliant.
GST rate slabs in India
GST is levied at multiple rates depending on the nature of goods or services. The 3% rate applies to precious metals like gold and silver jewellery. Essential items such as unpacked food grains, milk, and fresh vegetables are often exempt or taxed at 5%. Standard consumer goods, processed foods, and many services fall under 12% or 18%. Luxury items, automobiles, aerated beverages, and sin goods attract the highest slab of 28%, sometimes with additional cess. When you invoice a customer, the applicable rate must match the HSN or SAC classification of what you supply — using the wrong rate can trigger demand notices and penalties.
CGST, SGST, and IGST explained
For transactions within the same state, GST is split equally between Central GST (CGST) and State GST (SGST). If you sell goods worth ₹10,000 at 18% GST within Maharashtra, you charge ₹900 CGST and ₹900 SGST. When goods or services move across state borders, Integrated GST (IGST) applies instead — the entire tax goes to the central pool and is later apportioned to the consuming state. E-commerce sellers and businesses with customers in multiple states must track which type of tax applies on each invoice. Our calculator above lets you toggle between intra-state and inter-state modes so you can see the correct split instantly.
Adding GST vs removing GST from a price
Retailers often work with pre-tax prices and add GST on top. A ₹1,000 product at 18% becomes ₹1,180 inclusive. Conversely, if you receive an invoice showing ₹1,180 inclusive, you need to back-calculate the base amount (₹1,000) and the tax component (₹180). The formula for extracting GST is: base amount = inclusive price ÷ (1 + rate/100). This is especially useful when reconciling expenses, verifying vendor invoices, or preparing financial statements where you need to separate revenue from tax collected on behalf of the government.
When do you need GST registration?
GST registration is mandatory when your annual aggregate turnover exceeds ₹40 lakh for goods (₹20 lakh for services, and ₹10 lakh in special category states). Even below these thresholds, registration is compulsory for inter-state suppliers, casual taxable persons, non-resident taxable persons, e-commerce operators, and those liable to deduct or collect tax at source under GST. Voluntary registration is also available — useful if you want to claim input tax credit on purchases or appear more credible to B2B clients. Once registered, you receive a 15-digit GSTIN and must file periodic returns (GSTR-1, GSTR-3B, and annual returns) even in months with nil activity.
Input tax credit and compliance
Registered businesses can claim input tax credit (ITC) on GST paid on purchases used for business purposes. ITC reduces your net GST payable — you only remit the difference between tax collected on sales and tax paid on inputs. To claim ITC, you need valid tax invoices from GST-registered suppliers, and the tax must have been actually paid to the government (visible in your GSTR-2B). Mismatch between your returns and supplier data is one of the most common reasons for ITC reversals. Keeping accurate records and reconciling monthly saves significant cash flow headaches at year-end.
Get help with GST registration
If you're starting a business or crossing the turnover threshold, getting your GSTIN is the first step toward legal compliance. The registration process requires PAN, Aadhaar, business address proof, bank details, and photographs of promoters. Most applications are processed within 3–5 working days, though queries from the GST officer can extend the timeline.