GST

Complete GST Guide for India: Everything Businesses and Individuals Need to Know

Raghav

Published: February 1, 2025

25 min read

Complete GST Guide for India: Everything Businesses and Individuals Need to Know

GST, or Goods and Services Tax, has transformed India's tax landscape since its introduction in 2017. Whether you're running a business, freelancing, or just want to understand how GST affects your daily purchases, this guide will explain everything in simple terms.

I've helped hundreds of businesses navigate GST compliance, and I'm going to share everything you need to know – from basic concepts to advanced strategies.

What is GST? Understanding the Basics

GST is a comprehensive, multi-stage, destination-based tax that's levied on every value addition. Let me break that down:

Comprehensive: It replaced multiple indirect taxes (VAT, service tax, excise, etc.) with one unified tax.

Multi-stage: Tax is collected at every stage of the supply chain – from manufacturer to consumer.

Destination-based: Tax is collected where the goods/services are consumed, not where they're produced.

Value Addition: Tax is levied only on the value added at each stage.

Why GST Matters

Before GST, India had a complex tax structure:

Central taxes: Excise, Service Tax, Customs
State taxes: VAT, Entertainment Tax, Luxury Tax
Multiple tax rates and compliance requirements

GST simplified this into:

One tax system
Uniform rates across India
Easier compliance
Better input tax credit mechanism

GST Structure: CGST, SGST, and IGST

Understanding these three components is crucial:

CGST (Central GST)

Collected by Central Government
Applicable on intra-state supplies
Goes to Central Government

SGST (State GST)

Collected by State Government
Applicable on intra-state supplies
Goes to State Government

IGST (Integrated GST)

Collected by Central Government
Applicable on inter-state supplies
Distributed between Center and destination state

How It Works

Intra-State Transaction (Within Same State):

Example: You're in Mumbai, buying from a Mumbai supplier
GST Rate: 18%
Breakdown: 9% CGST + 9% SGST
Total: 18%

Inter-State Transaction (Between Different States):

Example: You're in Mumbai, buying from a Delhi supplier
GST Rate: 18%
Breakdown: 18% IGST (no CGST/SGST)
Total: 18%

GST Rates: Complete Breakdown

GST has multiple tax slabs. Here's the complete list:

GST Rate Structure

| GST Rate | Category | Examples | |----------|----------|----------| | 0% | Exempted | Fresh fruits, vegetables, milk, bread, salt, books, newspapers | | 0.25% | Rough precious stones | Uncut diamonds, rough precious stones | | 3% | Precious metals | Gold, silver, precious stones (when processed) | | 5% | Essential items | Packaged food items, medicines, transport services, restaurants (non-AC) | | 12% | Processed items | Processed food, computers, mobile phones, AC restaurants, business class air travel | | 18% | Standard rate | Most goods and services - electronics, cosmetics, financial services, IT services | | 28% | Luxury items | Cars, motorcycles, tobacco, aerated drinks, luxury hotels, cinema tickets |

Common Items and Their GST Rates

Food & Beverages:

Fresh fruits/vegetables: 0%
Packaged food: 5%
Restaurant food (non-AC): 5%
Restaurant food (AC): 12%
Restaurant food (luxury): 18%
Aerated drinks: 28%

Electronics:

Mobile phones: 12%
Computers/laptops: 12%
TVs, refrigerators: 18%
Luxury electronics: 28%

Services:

Transportation: 5%
Financial services: 18%
IT services: 18%
Hotel accommodation: 12-28% (based on tariff)
Cinema tickets: 28%

Precious Items:

Gold: 3%
Silver: 3%
Rough diamonds: 0.25%

GST Registration: Who Needs It?

Mandatory Registration

You MUST register for GST if:

Turnover Threshold:
Goods suppliers: Annual turnover exceeds ₹40 lakh
Service providers: Annual turnover exceeds ₹20 lakh
Special category states: ₹10-20 lakh (varies by state)

Inter-State Supply:
Any inter-state supply, regardless of turnover

E-commerce Sellers:
Selling through online platforms (Amazon, Flipkart, etc.)

Casual Taxable Persons:
Temporary business in a state where you're not registered

Reverse Charge Mechanism:
Liable to pay tax under reverse charge

Voluntary Registration

You CAN register voluntarily even if below threshold if:

You want to claim input tax credit
You want to do business with registered entities
You want to expand your business

Registration Process

Visit GST Portal: www.gst.gov.in
Fill Application: Form GST REG-01
Submit Documents:
PAN card
Aadhaar card
Business address proof
Bank account details
Photographs
Verification: Aadhaar authentication or physical verification
GSTIN Allotment: 15-digit GSTIN (GST Identification Number)

Timeline: Usually 3-7 working days

GST Filing: Returns and Compliance

Types of GST Returns

GSTR-1: Outward supplies (sales)

Due: 11th of next month
Frequency: Monthly (or quarterly for small taxpayers)

GSTR-3B: Summary return with tax payment

Due: 20th of next month
Frequency: Monthly
Includes: Tax liability, input tax credit, tax payment

GSTR-9: Annual return

Due: 31st December of next financial year
Frequency: Annual
Summary of all transactions for the year

GSTR-9C: Reconciliation statement

Due: 31st December of next financial year
Frequency: Annual
For taxpayers with turnover above ₹5 crore

Filing Process

Login to GST portal
Select return (GSTR-1, GSTR-3B, etc.)
Fill details:
Sales/purchases
Input tax credit
Tax liability
Calculate tax:
Use our GST Calculator for accurate calculations
Pay tax (if any)
File return
Download acknowledgment

Late Filing Penalties

| Delay Period | Penalty | |--------------|---------| | Up to 15 days | ₹500 per day (max ₹5,000) | | More than 15 days | ₹500 per day (max ₹5,000) + Interest | | No filing | ₹10,000 or 10% of tax due (whichever higher) |

Important: File returns on time to avoid penalties and maintain compliance.

Input Tax Credit (ITC): Maximizing Your Benefits

Input Tax Credit is one of the most important features of GST. It allows you to claim credit for tax paid on inputs.

How ITC Works

Example:

You buy raw materials: ₹1,00,000 + ₹18,000 GST = ₹1,18,000
You sell finished goods: ₹2,00,000 + ₹36,000 GST = ₹2,36,000
You can claim ITC: ₹18,000
Net GST to pay: ₹36,000 - ₹18,000 = ₹18,000

Conditions for Claiming ITC

Valid Invoice: Must have proper GST invoice
Goods/Services Received: Must have received the goods/services
Tax Paid: Supplier must have paid tax to government
Return Filed: Must have filed returns
Not Blocked: Item must not be in blocked credit list

Blocked Credits (Cannot Claim ITC)

Motor vehicles (except for specific business use)
Food and beverages
Club membership
Health insurance (unless for employees)
Works contract for construction
Personal expenses

ITC Utilization Rules

| Type of Tax | Can be Used Against | |-------------|---------------------| | CGST | CGST + IGST | | SGST | SGST + IGST | | IGST | IGST + CGST + SGST |

Priority: IGST must be used first, then CGST/SGST.

GST Calculation: Exclusive vs Inclusive

Understanding how to calculate GST correctly is crucial:

Exclusive GST Calculation

When to Use: When you know the base price and want to add GST.

Formula:

Base Amount: ₹10,000
GST Rate: 18%
GST Amount: ₹10,000 × 18% = ₹1,800
Total Amount: ₹10,000 + ₹1,800 = ₹11,800

Inclusive GST Calculation

When to Use: When you have the final price and want to know the GST component.

Formula:

Total Amount: ₹11,800
GST Rate: 18%
Base Amount: ₹11,800 ÷ 1.18 = ₹10,000
GST Amount: ₹11,800 - ₹10,000 = ₹1,800

Quick Reference Table

| Base Amount | GST Rate | GST Amount | Total Amount | |-------------|----------|------------|--------------| | ₹1,000 | 5% | ₹50 | ₹1,050 | | ₹1,000 | 12% | ₹120 | ₹1,120 | | ₹1,000 | 18% | ₹180 | ₹1,180 | | ₹1,000 | 28% | ₹280 | ₹1,280 | | ₹10,000 | 18% | ₹1,800 | ₹11,800 | | ₹1,00,000 | 18% | ₹18,000 | ₹1,18,000 |

Pro Tip: Use our GST Calculator for accurate calculations every time.

Composition Scheme: Simplified Compliance

The Composition Scheme is designed for small businesses to simplify GST compliance.

Eligibility

Annual turnover up to ₹1.5 crore (₹75 lakh for special category states)
Only for goods suppliers (not service providers)
Cannot claim input tax credit
Cannot make inter-state supplies

Tax Rates Under Composition

| Business Type | Tax Rate | |---------------|----------| | Manufacturers | 1% of turnover | | Traders | 1% of turnover | | Restaurants | 5% of turnover | | Other suppliers | 1% of turnover |

Advantages

Simple compliance (quarterly returns)
Lower tax rates
Less paperwork
No need to maintain detailed records

Disadvantages

Cannot claim ITC
Cannot make inter-state supplies
Limited to ₹1.5 crore turnover
Cannot issue tax invoices

Common GST Scenarios

Scenario 1: Restaurant Owner

Situation:

Running a restaurant in Mumbai
Monthly turnover: ₹5 lakh
Serves both AC and non-AC areas

GST Applicable:

Non-AC area: 5% GST
AC area: 12% GST
Luxury restaurant: 18% GST

Action:

Register for GST (mandatory above ₹20 lakh for services)
Charge appropriate GST rates
File monthly returns
Claim ITC on purchases

Scenario 2: E-commerce Seller

Situation:

Selling products online
Annual turnover: ₹30 lakh
Selling through Amazon/Flipkart

GST Applicable:

Must register (mandatory for e-commerce)
TCS (Tax Collected at Source) applies
Platform collects 1% TCS
You file returns and claim TCS credit

Action:

Register for GST immediately
Understand TCS mechanism
File returns regularly
Reconcile TCS with your returns

Scenario 3: Freelancer/Consultant

Situation:

Providing IT consulting services
Annual income: ₹15 lakh
Working with clients across India

GST Applicable:

Must register (above ₹20 lakh threshold)
18% GST on services
IGST for inter-state clients
CGST+SGST for intra-state clients

Action:

Register for GST
Issue proper invoices
Charge GST correctly
File returns monthly

GST for Individuals: What You Need to Know

Even if you're not running a business, GST affects you:

Daily Purchases

GST on Common Items:

Groceries: 0-5% (most essentials are 0%)
Restaurant food: 5-18% (depending on type)
Electronics: 12-28%
Services: 18% (most services)

Understanding Your Bills

When you see a bill:

Look for GST breakdown
CGST + SGST = Intra-state
IGST = Inter-state
Total includes GST

Claiming GST Refund

As an individual, you generally cannot claim GST refunds. However:

If you're registered (business), you can claim ITC
Export transactions are zero-rated
Some specific cases allow refunds

GST Compliance: Best Practices

1. Maintain Proper Records

Keep Records Of:

All invoices (sales and purchases)
Payment receipts
Bank statements
Delivery challans
E-way bills (for transport)

Retention Period: 6 years from end of financial year

2. Issue Proper Invoices

Invoice Must Contain:

GSTIN of supplier and recipient
Invoice number and date
Description of goods/services
HSN/SAC code
Taxable value
GST rate and amount
Total amount

3. File Returns on Time

Set reminders for due dates
Prepare documents in advance
Use GST portal or authorized software
Verify data before filing

4. Reconcile Regularly

Match purchase invoices with GSTR-2A
Verify ITC claims
Reconcile sales with GSTR-1
Identify and resolve discrepancies

5. Use Technology

GST-compliant accounting software
E-invoicing (mandatory for large businesses)
Automated return filing
GST calculators for accuracy

Common Mistakes to Avoid

Mistake 1: Not Registering When Required

Penalty: ₹10,000
Can face legal issues
Cannot claim ITC

Mistake 2: Wrong GST Rate Application

Can lead to underpayment or overpayment
May face penalties
Always verify HSN/SAC codes

Mistake 3: Not Claiming ITC Properly

Missing out on tax credits
Higher tax liability
Always verify invoices

Mistake 4: Late Filing

Penalties and interest
Blocked ITC
Compliance issues

Mistake 5: Not Maintaining Proper Records

Difficult to file returns
Cannot claim ITC
Legal issues during audit

Using Our GST Calculators

We've built comprehensive calculators to help you:

GST Calculator: Calculate GST for any amount and rate
GST Input Credit Calculator: Calculate available ITC and utilization

GST Updates and Changes

GST is an evolving system. Stay updated with:

GST Council meetings (held regularly)
Circulars and notifications from CBIC
Changes in rates and rules
Compliance requirements

Recent Important Changes:

E-invoicing mandatory for businesses above ₹5 crore
QR code mandatory on B2C invoices
HSN code requirements based on turnover

Final Thoughts

GST might seem complex at first, but with proper understanding and tools, it becomes manageable. The key is:

Understand the basics (rates, registration, filing)
Maintain proper records (invoices, receipts)
File returns on time (avoid penalties)
Claim ITC correctly (maximize benefits)
Use technology (calculators, software)

Whether you're a business owner or an individual, understanding GST helps you make informed decisions and stay compliant.

If you need help with GST calculations or have questions, use our GST Calculator or reach out through our contact page. Stay compliant, stay informed!