What is GST?
GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services in India. Introduced on July 1, 2017, GST replaced multiple indirect taxes like VAT, Service Tax, Excise Duty, and more.
GST operates on a "One Nation, One Tax" principle, making India a unified market. It's a destination-based tax, meaning tax is collected where goods/services are consumed, not where they're produced.
💡 Key Takeaway
GST simplified India's tax structure by combining 17+ indirect taxes into one unified system, reducing cascading tax effects and making compliance easier for businesses.
Types of GST in India
1. CGST (Central GST)
Tax collected by the Central Government on intra-state supplies (within same state). For example, if you sell goods in Maharashtra to a buyer in Maharashtra, CGST applies.
2. SGST (State GST)
Tax collected by State Governments on intra-state supplies. SGST is always equal to CGST and collected simultaneously.
3. IGST (Integrated GST)
Tax collected by the Central Government on inter-state supplies (between different states) and imports. IGST = CGST + SGST.
4. UGST (Union Territory GST)
Similar to SGST but applicable in Union Territories without legislatures (like Andaman & Nicobar).
| Tax Type | Collected By | When Applicable |
|---|---|---|
| CGST | Central Govt | Within same state |
| SGST | State Govt | Within same state |
| IGST | Central Govt | Between states / Imports |
| UGST | UT Govt | Within UTs |
GST Rate Slabs in India
GST has five tax slabs: 0%, 5%, 12%, 18%, and 28%. Essential items are taxed lower, while luxury goods attract higher rates.
| GST Rate | Examples |
|---|---|
| 0% | Rice, milk, vegetables, education, healthcare |
| 5% | Sugar, tea, coffee, edible oils, medicines |
| 12% | Computers, processed food, umbrellas |
| 18% | Soaps, toothpaste, industrial intermediaries |
| 28% | Cars, cigarettes, luxury items, aerated drinks |
Special rates: Gold attracts 3%, and rough diamonds 0.25%.
Who Needs GST Registration?
GST registration is mandatory if:
- Your annual turnover exceeds ₹40 lakh (₹20 lakh for special category states)
- You supply goods/services inter-state
- You're an e-commerce seller
- You're engaged in casual/non-resident taxable supply
- You want to claim Input Tax Credit (ITC)
⚠️ Registration Threshold 2026
₹40 lakh for goods suppliers (₹20 lakh for services). Special category states: ₹10-20 lakh. Check if registration is mandatory using our Registration Checker.
How Does GST Work?
GST operates on the Value Addition principle. Tax is levied at each stage of production/distribution, but businesses can claim Input Tax Credit (ITC) for taxes paid on purchases.
Example:
- Manufacturer buys raw materials for ₹1,000 + 18% GST (₹180) = ₹1,180
- Sells finished goods for ₹2,000 + 18% GST (₹360) = ₹2,360
- Pays to Govt: ₹360 (output tax) - ₹180 (ITC) = ₹180
This eliminates cascading tax (tax on tax) that existed in the old system.
GST Return Filing
Registered taxpayers must file periodic GST returns:
| Return Type | Frequency | Due Date |
|---|---|---|
| GSTR-1 | Monthly | 11th of next month |
| GSTR-3B | Monthly | 20th of next month |
| GSTR-9 | Annual | December 31 |
Late filing attracts penalties and interest. Use our Penalty Calculator to check late fees.
Benefits of GST
- Simplified tax structure - One tax instead of 17+
- Eliminated cascading - No tax on tax
- Lower prices - Reduced tax burden on end consumers
- Ease of compliance - Online filing via GST portal
- Unified market - No state border tax barriers
- Increased tax base - More businesses came under tax net
Common GST Terms
- GSTIN: 15-digit GST registration number
- ITC: Input Tax Credit - tax paid on purchases
- HSN Code: Harmonized System of Nomenclature - product classification code
- SAC Code: Services Accounting Code - service classification code
- E-Way Bill: Electronic waybill for goods transport above ₹50,000
- Reverse Charge: Receiver pays tax instead of supplier
🧮 Use Free GST Tools
Calculate GST, find HSN codes, check penalties, and more with our free calculators.
View All Tools →Frequently Asked Questions
Is GST registration free?
Yes, GST registration is completely free on the official GST portal. No fees are charged by the government.
Can I cancel GST registration?
Yes, if your turnover falls below the threshold or you close business, you can apply for cancellation.
What is the penalty for not registering under GST?
10% of tax due or ₹10,000, whichever is higher. Plus interest at 18% p.a.
Do small businesses need GST registration?
Only if turnover exceeds ₹40 lakh (goods) or ₹20 lakh (services). Below that, registration is optional.