Goods and Services Tax (GST) in India
A practical overview of India's indirect tax system — what it is, how it works, and what businesses need to know about rates, filing, and compliance.
What is GST?
Goods and Services Tax (GST) is India's unified indirect tax, introduced on 1 July 2017 under the 101st Constitutional Amendment Act. It replaced a cascade of central and state taxes — excise duty, service tax, VAT, entry tax, Octroi, and others — with a single comprehensive levy on the supply of goods and services.
GST operates on a destination-based consumption tax model: tax is collected where the goods or services are consumed, not where they are produced. This principle drives the inter-state vs. intra-state distinction that determines whether CGST+SGST or IGST applies.
The Four Types of GST
CGST — Central GST
Collected by the Central Government on intra-state supplies. Revenue goes to the Centre. Applies alongside SGST on the same transaction.
SGST — State GST
Collected by State Governments on intra-state supplies. Revenue goes to the state. Each state has its own SGST Act.
IGST — Integrated GST
Collected by the Central Government on inter-state supplies and imports. The rate equals CGST + SGST combined. Revenue is apportioned between Centre and destination state.
UTGST — Union Territory GST
Applies in Union Territories without legislatures (Chandigarh, Andaman & Nicobar, Dadra & Nagar Haveli, Ladakh). Functions like SGST but for UTs.
When does CGST+SGST apply vs. IGST?
The determining factor is whether the supply is intra-state or inter-state:
- Intra-state (supplier and place of supply are in the same state): CGST + SGST apply, each at half the total GST rate.
- Inter-state (supplier and place of supply are in different states): IGST applies at the full GST rate.
- Imports: Treated as inter-state supplies. IGST applies (or Basic Customs Duty + IGST for imports).
For example, if a business in Maharashtra sells goods worth ₹1,00,000 to a buyer in Karnataka at 18% GST, IGST of ₹18,000 applies. If the same sale were to a buyer in Maharashtra, CGST of ₹9,000 and SGST of ₹9,000 would apply.
GST Rate Slabs
India has four primary GST rate slabs, plus a 0% (exempt) category and a special 0.25% rate. The GST Council reviews rates periodically.
| Rate | Category | Common Examples |
|---|---|---|
| 0% | Nil rated / Exempt | Fresh fruits, unbranded grains, milk, eggs, books, newspapers |
| 0.25% | Special rate | Unbranded packaged food, diamonds, precious stones |
| 3% | Special category | Gold/silver ornaments, affordable real estate |
| 5% | Common goods | Apparel under ₹1,000, footwear under ₹1,000, sugar, tea, spices |
| 12% | Processed goods | Apparel above ₹1,000, processed food, computers, fertilisers |
| 18% | Standard rate | Capital goods, IT services, financial services, telecom, AC restaurants |
| 28% | Luxury / sin goods | Automobiles, tobacco, aerated water, cement, ACs, washing machines |
Source: GST Council notifications. Rates are indicative — specific HSN codes may have different rates based on Council decisions.
Registration Threshold
GST registration is mandatory when aggregate turnover exceeds the threshold in the preceding financial year:
- ₹40 lakh for suppliers of goods (₹20 lakh for special category states in the North-East and hill states)
- ₹20 lakh for suppliers of services (₹10 lakh for special category states)
- ₹20 lakh for inter-state suppliers, regardless of goods or services
Certain categories require mandatory registration regardless of turnover: inter-state suppliers, e-commerce operators, TDS deductors, and those required to pay tax under reverse charge.
Key Filing Dates
| Return | Due Date | Description |
|---|---|---|
| GSTR-1 | 11th of next month | Monthly outward supplies (B2B, B2CL, B2CS, exports, HSN summary) |
| GSTR-3B | 20th of next month | Monthly summary return with tax payment |
| GSTR-1 (QRMP) | 13th of next month | Quarterly filers under QRMP scheme |
| GSTR-3B (QRMP) | 22nd/24th of next month | Quarterly filers (date varies by state) |
| GSTR-9 | 31st December | Annual return (mandatory if turnover > ₹2 crore) |
| GSTR-9C | 31st December | Reconciliation statement (mandatory if turnover > ₹5 crore) |
Late filing attracts interest at 18% per annum on the net tax liability, plus a late fee of ₹50/day (₹25 for nil returns) subject to caps.
Input Tax Credit (ITC)
One of GST's core features is the seamless flow of Input Tax Credit across the supply chain. A registered person can claim credit for GST paid on inputs (raw materials, capital goods, services) used for business purposes, reducing their output tax liability.
Key ITC rules:
- ITC can only be claimed if the supplier has filed their GSTR-1, making the invoice visible in the buyer's GSTR-2B
- ITC must be backed by a valid tax invoice or debit note
- ITC is not available for certain categories: personal use, motor vehicles (with exceptions), food and beverages, outdoor catering, beauty treatment, health services, cosmetic or plastic surgery (unless used for further supply or export)
- ITC must be reversed if payment is not made to the supplier within 180 days of the invoice date
- Blocked credits under Rule 36(4) restrict ITC to 105% of eligible credit appearing in GSTR-2B
The GSTN Portal and Returns
All GST compliance happens through the GST Network (GSTN) portal at gst.gov.in. The primary monthly returns are:
- GSTR-1 — Details of all outward supplies (sales). This is the foundation of the invoice-matching system.
- GSTR-2B — Auto-drafted input tax credit statement, generated from suppliers' GSTR-1 filings. Buyers verify and claim ITC based on this.
- GSTR-3B — Monthly summary return with tax liability and payment. This is where tax is actually paid.
Tools to Help You File
GSTSelf provides client-side tools to prepare your GST returns, validate your data, and reconcile your records — all without uploading your data to any server.