GST Guide for Indian Businesses: Rates, ITC & Everything You Need to Know
A comprehensive GST reference for Indian businesses — understanding CGST/SGST/IGST, all tax slabs, input tax credit, registration thresholds, and invoice requirements.
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GST (Goods and Services Tax) replaced 17 central and state taxes in India on 1 July 2017, creating a unified national tax framework. For businesses, GST has two major impacts: you collect tax from your customers (output tax) and pay tax to your suppliers (input tax). The difference — output tax minus input tax credit — is what you remit to the government.
What Is GST?
GST is a destination-based, multi-stage tax on the supply of goods and services. 'Destination-based' means tax accrues to the state where goods or services are consumed, not where they are produced. 'Multi-stage' means it is collected at every stage of the supply chain — from manufacturer to wholesaler to retailer — with each stage claiming credit for taxes paid in the previous stage, avoiding cascading tax-on-tax.
GST Tax Slabs and Rates
| Rate | Category | Examples |
|---|---|---|
| 0% | Essential goods/services | Fresh produce, milk, eggs, books, healthcare, education |
| 5% | Basic necessities | Sugar, tea, coffee, edible oils, coal, branded cereals, economy transport |
| 12% | Standard goods | Processed foods, butter, cheese, almonds, mobile phones, business class air travel |
| 18% | Standard services | Financial services, IT services, hotels (above ₹7,500/night), most restaurants, electronics |
| 28% | Luxury/sin goods | Cars, AC units, tobacco, pan masala, luxury hotels, high-end automobiles |
| Cess | Additional on sin goods | Tobacco, coal, aerated drinks, luxury cars — over and above the 28% slab |
CGST, SGST, and IGST Explained
GST is divided between the central government and state governments. For intra-state supplies (buyer and seller in the same state): the total GST rate is split equally into CGST (Central GST) and SGST (State GST). For a 18% GST transaction, 9% CGST goes to the Centre and 9% SGST to the state. For inter-state supplies (buyer and seller in different states): IGST (Integrated GST) at the full rate applies and is shared between Centre and destination state.
Calculate GST instantly
Calculate CGST, SGST, and IGST for any amount across all tax slabs.
Input Tax Credit (ITC)
ITC is the central benefit of GST for businesses. When you purchase inputs (goods or services for business use), the GST you pay is an 'input tax credit' that can be set off against your output tax liability. Example: you buy ₹10,000 of materials (18% GST = ₹1,800) and sell products for ₹15,000 (18% GST = ₹2,700). You remit only ₹2,700 - ₹1,800 = ₹900 to the government — the remaining ₹1,800 is your ITC.
GST Registration Threshold
- General (most states): ₹40 lakh annual aggregate turnover (goods) or ₹20 lakh (services)
- Special category states (Northeast, Jammu & Kashmir, Himachal, Uttarakhand): ₹20L (goods), ₹10L (services)
- Composition scheme: eligible if turnover ≤ ₹1.5 crore (manufacturers/traders), ₹75L (restaurants)
- Mandatory regardless of turnover: inter-state supply, e-commerce sellers, casual taxable persons
- Voluntary registration possible for those below threshold — allows ITC claims
GST Invoice Requirements
- Supplier GSTIN and legal name/trade name
- Invoice number (sequential, unique per financial year)
- Date of issue
- Recipient details: name, address, GSTIN (if registered), state code
- HSN code (for goods) or SAC code (for services)
- Description, quantity, and value of each line item
- Taxable value, applicable GST rate, and CGST/SGST or IGST amount
- Total invoice value including GST
- Whether it is an intra-state or inter-state supply
Frequently Asked Questions
Do I need to register for GST if I'm a freelancer?
If your annual service income exceeds ₹20 lakh (₹10 lakh for special category states), GST registration is mandatory. Below the threshold, registration is optional but you cannot claim ITC or charge GST on invoices. If you provide services to businesses (B2B) that want to claim ITC, voluntary registration may benefit your clients and your business relationships.
What is the Composition Scheme under GST?
The Composition Scheme is for small businesses (turnover ≤ ₹1.5 crore for most): pay a fixed 1-2% of turnover as tax instead of the standard rates. Simpler compliance (quarterly returns), but you cannot claim ITC and cannot supply to interstate customers or e-commerce. Suitable for small local businesses with mostly B2C customers.
What is an e-invoice (GST e-invoice) and who needs it?
E-invoicing under GST requires businesses above certain turnover thresholds to register their invoices on the GST portal (IRP) before issuing them, receiving a unique IRN and QR code. Currently mandatory for businesses with turnover above ₹10 crore. The threshold has been progressively lowered and is expected to cover more businesses.