What is GST in India?
India's Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax that replaced a complex web of over 17 central and state taxes — including central excise duty, service tax, VAT, CST, entry tax, luxury tax, and octroi. GST was introduced on 1 July 2017, making it one of the most significant tax reforms in India's history since independence.
GST is governed by the GST Council, a joint forum of the Central Government and all 28 states plus 8 Union Territories. The council decides rate changes, exemptions, and policy. The technology backbone — registration, return filing, and invoice matching — is managed by the GSTN (GST Network), a non-profit company.
India's 4-tier GST rate structure
India operates five GST rate slabs. The calculator above supports all of them:
- 0% — Essential goods: fresh fruits and vegetables, unbranded cereals, milk, eggs, fresh meat and fish, jaggery, salt, bread, and educational services. No GST is charged, but registered businesses can claim input credits.
- 5% — Basic necessities: packaged food, edible oils, sugar, tea, coffee (not coffee at restaurants), domestic LPG, transport services (economy class air travel, railways), and life-saving drugs.
- 12% — Processed and semi-luxury goods: processed food, smartphones, computers, business class air travel, non-AC hotel rooms, and construction services.
- 18% — Standard rate: most services including IT and software, financial services, telecom, restaurants (non-AC), hair salons, packaged goods, mid-range electronics, and most manufactured goods not in other slabs.
- 28% — Luxury and demerit goods: cars (plus cess), motorcycles above 350cc, tobacco products, aerated drinks, cement, large TVs, and air conditioners. Many items in this slab also attract an additional GST Compensation Cess.
CGST, SGST, and IGST — explained simply
India's federal structure means GST revenue is shared between the Central Government and the States. How it splits depends on whether the supply is intra-state or inter-state:
- CGST + SGST — for supplies within the same state. The GST rate is split equally: for 18% GST, the buyer pays 9% CGST (to Central Government) + 9% SGST (to the state). The seller collects both and remits them separately.
- IGST — for supplies across states, imports, and exports. The full 18% is charged as IGST, collected by the Central Government, and then apportioned to the destination state. This prevents tax cascading across state lines.
For the buyer, the total tax paid is the same either way. For the seller, filing is slightly different — CGST/SGST returns vs. IGST returns.
GST registration threshold
Businesses with annual aggregate turnover exceeding ₹20 lakh must register for GST. For businesses in special category states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, and Uttarakhand), the threshold is ₹10 lakh. Since 2019, for businesses dealing exclusively in goods (not services), the threshold in most states was raised to ₹40 lakh.
Registration is done online through the GST Portal (gst.gov.in). Once registered, businesses receive a 15-digit GSTIN (GST Identification Number) and must file monthly or quarterly returns (GSTR-1, GSTR-3B) and an annual return (GSTR-9).
The Composition Scheme
Small businesses with annual turnover up to ₹1.5 crore can opt for the Composition Scheme — a simplified compliance regime with flat tax rates:
- Manufacturers and traders: 1% of turnover
- Restaurants (not serving alcohol): 5% of turnover
- Service providers (added 2019): 6% of turnover
Composition dealers cannot collect GST from customers — the tax is borne by the dealer. They also cannot claim input tax credits on purchases. For a freelancer, consultant, or small service business under ₹50 lakh, the scheme significantly reduces paperwork.
How to calculate GST in India
To add GST to a net price:
- GST amount = Net price × (rate ÷ 100)
- Total (inc. GST) = Net price × (1 + rate ÷ 100)
- Example at 18%: ₹10,000 (ex-GST) → GST = ₹1,800 → Total = ₹11,800
- Example at 18%: ₹50,000 (ex-GST) → GST = ₹9,000 → Total = ₹59,000
- Example at 28%: ₹1,00,000 (ex-GST) → GST = ₹28,000 → Total = ₹1,28,000
To remove GST from a gross (GST-inclusive) price:
- Net price = Gross price ÷ (1 + rate ÷ 100)
- GST amount = Gross price − Net price
- Example at 18%: ₹11,800 (inc. GST) → Net = ₹11,800 ÷ 1.18 = ₹10,000. GST = ₹1,800.
- Example at 12%: ₹56,000 (inc. GST) → Net = ₹56,000 ÷ 1.12 = ₹50,000. GST = ₹6,000.
Select the appropriate rate in the calculator above and enter your amount — it handles all five slabs instantly. For invoicing clients with correct GST applied, the free invoice generator lets you set any tax rate and export a professional PDF in seconds.