What is GST?
GST (Goods and Services Tax) is India's comprehensive indirect tax that replaced a fragmented system of multiple taxes including VAT, Service Tax, Central Excise Duty, CST, Octroi, Entertainment Tax, and more. GST was implemented on July 1, 2017 under the principle of "One Nation One Tax."
GST is a destination-based consumption tax — it is levied at the point of consumption, not production. This means the tax revenue goes to the state where the goods or services are consumed, not where they are produced.
GST Rate Structure in India 2026
| GST Rate | Category | Examples | Items Count |
|---|---|---|---|
| 0% (Exempt) | Essential items & basic necessities | Fresh vegetables, fruits, milk, eggs, curd, salt, bread, books, newspapers, unbranded atta/rice/dal, healthcare services, education | ~500+ items |
| 5% | Basic goods, some food items | Packaged food, edible oils, tea, coffee, sugar, domestic LPG, kerosene, coal, agarbatti, life-saving drugs, economy hotels | ~100+ items |
| 12% | Standard goods, processed food | Processed/frozen food, ghee, butter, packed dry fruits, computers, smartphones, business-class air travel | ~250+ items |
| 18% | Most goods and services | Restaurant bills (AC), shampoo, toothpaste, ice cream, TV, washing machine, financial services, IT services, hotel rooms (₹7,500+) | ~400+ items |
| 28% | Luxury and sin goods | High-end cars, aerated drinks, tobacco products, luxury hotels, casinos, betting, cement, paints, air conditioners | ~150+ items |
GST Calculation — Exclusive vs Inclusive
Method 1: GST Exclusive (Adding GST to base price)
Used when you know the original price and need to add GST to find the final selling price:
Final Price = Original Price + GST Amount
Example 1: Restaurant bill ₹2,000 at 5% GST
GST = 2,000 × 5/100 = ₹100
Final = 2,000 + 100 = ₹2,100
Example 2: Software service ₹50,000 at 18% GST
GST = 50,000 × 18/100 = ₹9,000
Final = 50,000 + 9,000 = ₹59,000
Example 3: Luxury car ₹10 Lakhs at 28% GST
GST = 10,00,000 × 28/100 = ₹2,80,000
Final = 10,00,000 + 2,80,000 = ₹12,80,000
Method 2: GST Inclusive (Extracting GST from MRP)
Used when you know the total price including GST and want to find the base price and GST amount:
GST Amount = Total Price − Base Price
Example: MRP tag shows ₹1,180, GST rate is 18%
Base Price = 1,180 × 100 / 118 = ₹1,000
GST Amount = 1,180 − 1,000 = ₹180
CGST = ₹90, SGST = ₹90 (intra-state)
OR IGST = ₹180 (inter-state)
CGST, SGST, IGST — Explained Clearly
GST is split between central and state governments:
| Component | Full Form | Who Collects | When Applied |
|---|---|---|---|
| CGST | Central GST | Central Government | Sale within same state |
| SGST | State GST | State Government | Sale within same state |
| IGST | Integrated GST | Central Government (shared with states) | Inter-state sales, imports |
| UTGST | Union Territory GST | Union Territory | Sales within Union Territory |
Total GST 18% = CGST 9% + SGST 9%
INTER-STATE SALE (Tamil Nadu → Delhi):
Total GST 18% = IGST 18% (entirely)
Example: ₹1,000 item, 18% GST
Intra: CGST ₹90 + SGST ₹90 = ₹180 total
Inter: IGST ₹180 = ₹180 total
Same total amount, different distribution!
Complete GST Calculation Table — All Rates
| Base Price | GST 5% | Final 5% | GST 12% | Final 12% | GST 18% | Final 18% | GST 28% | Final 28% |
|---|---|---|---|---|---|---|---|---|
| ₹100 | ₹5 | ₹105 | ₹12 | ₹112 | ₹18 | ₹118 | ₹28 | ₹128 |
| ₹500 | ₹25 | ₹525 | ₹60 | ₹560 | ₹90 | ₹590 | ₹140 | ₹640 |
| ₹1,000 | ₹50 | ₹1,050 | ₹120 | ₹1,120 | ₹180 | ₹1,180 | ₹280 | ₹1,280 |
| ₹5,000 | ₹250 | ₹5,250 | ₹600 | ₹5,600 | ₹900 | ₹5,900 | ₹1,400 | ₹6,400 |
| ₹10,000 | ₹500 | ₹10,500 | ₹1,200 | ₹11,200 | ₹1,800 | ₹11,800 | ₹2,800 | ₹12,800 |
| ₹50,000 | ₹2,500 | ₹52,500 | ₹6,000 | ₹56,000 | ₹9,000 | ₹59,000 | ₹14,000 | ₹64,000 |
| ₹1,00,000 | ₹5,000 | ₹1,05,000 | ₹12,000 | ₹1,12,000 | ₹18,000 | ₹1,18,000 | ₹28,000 | ₹1,28,000 |
GST Input Tax Credit (ITC) — Business Benefit
One of GST's most important features is the Input Tax Credit mechanism. Businesses can deduct the GST paid on purchases from the GST collected on sales, eliminating the cascading effect of "tax on tax."
Manufacturer buys raw material for ₹1,00,000 + 18% GST = ₹18,000 GST paid
Manufactures product, sells for ₹2,00,000 + 18% GST = ₹36,000 GST collected
GST Payable = GST Collected − GST Paid (ITC)
GST Payable = ₹36,000 − ₹18,000 = ₹18,000 only
WITHOUT ITC: Would pay ₹36,000 (36% effective rate!)
WITH ITC: Pays only ₹18,000 (18% effective rate) ✅
GST Registration Threshold
| Business Type | Threshold for Registration |
|---|---|
| Goods suppliers (normal states) | Annual turnover > ₹40 Lakhs |
| Service providers (normal states) | Annual turnover > ₹20 Lakhs |
| Goods suppliers (special category states) | Annual turnover > ₹20 Lakhs |
| E-commerce operators | Mandatory regardless of turnover |
| Inter-state supply | Mandatory regardless of turnover |
| Casual taxable person | Mandatory regardless of turnover |
GST Return Filing — Types and Deadlines
| Return Type | Who Files | Frequency | Due Date |
|---|---|---|---|
| GSTR-1 | All registered suppliers | Monthly/Quarterly | 11th/13th of next month |
| GSTR-3B | All registered suppliers | Monthly | 20th of next month |
| GSTR-9 | All registered suppliers | Annual | 31st December |
| GSTR-4 | Composition scheme | Annual | 30th April |
Composition Scheme — For Small Businesses
Small businesses with annual turnover up to ₹1.5 crore can opt for the Composition Scheme:
- Manufacturers: Pay 1% GST on turnover
- Restaurants: Pay 5% GST on turnover
- Other services: Pay 6% GST on turnover
- Cannot claim Input Tax Credit
- Simplified quarterly return filing
Frequently Asked Questions
Q: Is GST charged on exported goods?
No! Exports are zero-rated under GST. Exporters can also claim refund of GST paid on inputs used for export production, making Indian exports more competitive globally.
Q: What is E-way Bill in GST?
E-way Bill is an electronic document required for movement of goods worth more than ₹50,000. It can be generated on the E-way Bill portal and must accompany the goods during transport.
Q: Can I claim GST on purchases for personal use?
No. GST Input Tax Credit is only available for purchases used in the course of business. Personal purchases do not qualify for ITC.
Q: What is the GST rate on real estate?
Under-construction residential properties: 5% GST (1% for affordable housing). Completed/ready-to-move properties: No GST if Completion Certificate obtained before sale. Commercial properties: 12% GST.