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India GST Guide

India's Goods and Services Tax (GST), introduced on 1 July 2017, is a comprehensive indirect tax that replaced multiple central and state taxes. GST is a destination-based consumption tax with four main rate slabs: 5%, 12%, 18%, and 28%. Intra-state supplies are split equally into CGST (Central GST) and SGST (State GST). Inter-state supplies attract IGST (Integrated GST) at the full rate.

GST Rate Slabs

  • 5%: Essential items — packaged food items, footwear below INR 1,000, railway and economy-class air tickets, fertilisers, medicines, and coal.
  • 12%: Processed foods, butter, cheese, ghee, almonds, mobile phones, business-class air tickets, and diagnostic kits.
  • 18%: Standard rate for most goods and services — IT services, telecom services, hair oil, toothpaste, soaps, capital goods, and restaurant services (non-air-conditioned).
  • 28%: Luxury and sin goods — luxury cars, tobacco products, aerated drinks, motorcycles above 350cc, and air-conditioned restaurants. A compensation cess may also apply on these items.

Some items are exempt (0% GST): fresh fruits and vegetables, milk, eggs, bread, salt, and educational services.

CGST, SGST, and IGST

  • Intra-state supplies (within the same state): Total GST rate is split equally — half as CGST (collected by the Central Government) and half as SGST (collected by the State Government). For an 18% supply: 9% CGST + 9% SGST.
  • Inter-state supplies (between states): IGST applies at the full rate, collected by the Central Government. The importing state claims a share through the GST revenue-sharing mechanism.
  • Imports: IGST is levied on imports (in addition to customs duty). The importer can claim input tax credit for the IGST paid.

Composition Scheme

Small businesses with an aggregate turnover of up to INR 1.5 crore (INR 75 lakh for special category states) can opt for the composition scheme. Under this scheme, taxpayers pay GST at a lower rate (1% for traders, 6% for manufacturers, 5% for restaurants) but cannot claim input tax credit. The scheme reduces compliance burden — quarterly returns and limited record-keeping.

E-Invoicing

Businesses with an aggregate turnover exceeding INR 5 crore (as of 2025-26) must generate e-invoices for all B2B transactions. The e-invoice is a standardised invoice generated on the GST portal (Invoice Registration Portal — IRP) and assigned a unique Invoice Reference Number (IRN). E-invoicing enables real-time reporting and reduces GST evasion.

FAQs

What is the GST registration threshold?

Businesses with an aggregate turnover exceeding INR 40 lakh (INR 20 lakh for special category states) in a financial year must register for GST. For service providers, the threshold is INR 20 lakh (INR 10 lakh for special category states).

Can I claim an input tax credit?

Yes, registered businesses can claim input tax credit (ITC) on GST paid on purchases used for business purposes. ITC cannot be claimed for personal use, goods lost or destroyed, or goods used for exempt supplies.

What is the reverse charge mechanism?

Under the reverse charge mechanism (RCM), the recipient (not the supplier) pays GST directly to the government. This applies to supplies from unregistered dealers, certain goods and services notified by the government, and imports of services.