Quick Answer
Goods and Services Tax (GST) is a single indirect tax charged on the supply of goods and services across India. It started on 1 July 2017 and replaced older taxes such as excise duty, VAT and service tax. GST is collected at every stage of a sale, but each business gets credit for the tax it has already paid on its purchases, so the final burden falls only on the end consumer.
What does GST mean?
GST stands for Goods and Services Tax. It is a destination-based tax, which means the tax goes to the state where the goods or services are finally consumed, not to the state where they were made.
Before GST, a business dealt with many separate taxes: central excise, state VAT, service tax, entry tax, octroi and more. Tax was often charged on top of tax. GST brought these under one law, one portal and one return system, which is why it is called "One Nation, One Tax".
Types of GST: CGST, SGST and IGST
India follows a dual GST model. The Centre and the State both tax the same sale, and the rate is split between them.
| Type | Collected by | When it applies |
|---|---|---|
| CGST (Central GST) | Central Government | Sale within the same state |
| SGST (State GST) | State Government | Sale within the same state |
| UTGST | Union Territory | Sale within a Union Territory without a legislature |
| IGST (Integrated GST) | Central Government, then shared with the consuming state | Sale from one state to another, and imports |
Example: a trader in Delhi sells goods to a customer in Delhi at 18% GST. The invoice shows 9% CGST and 9% SGST. If the same trader sells to a customer in Haryana, the invoice shows 18% IGST.
GST rate slabs
The GST Council simplified the rate structure from 22 September 2025. Most goods and services now fall under two main rates:
- 5%: everyday and essential items
- 18%: the standard rate for most goods and services
- 40%: a special rate for select luxury and sin goods
Many essentials are exempt or taxed at nil rate, and a few items such as gold have their own special rates. The exact rate depends on the HSN code (for goods) or SAC code (for services), so always check the rate for your own product before you raise an invoice.
Who must register for GST?
GST registration is compulsory once your yearly turnover crosses the threshold limit:
- Goods: Rs. 40 lakh in most states (Rs. 20 lakh in some states)
- Services: Rs. 20 lakh in most states (Rs. 10 lakh in some special category states)
Some businesses must register whatever their turnover. This includes those who sell goods to other states, most sellers on e-commerce platforms, casual taxable persons and those who must pay tax under reverse charge.
Not sure if you need a GSTIN? TaxBucket checks your turnover, state and business type before applying, so you do not register when it is not required or miss it when it is.
How input tax credit works
Input Tax Credit (ITC) is what removes the tax-on-tax problem. You reduce the GST you paid on purchases from the GST you collected on sales, and pay only the difference.
- 1
Manufacturer sells to a trader
Price Rs. 1,000 plus 18% GST of Rs. 180. The manufacturer deposits Rs. 180.
- 2
Trader sells to the customer
Price Rs. 1,500 plus 18% GST of Rs. 270.
- 3
Trader claims credit
The trader pays only Rs. 270 minus Rs. 180, that is Rs. 90.
The government receives Rs. 270 in total, which is exactly 18% of the final price. To claim ITC, your supplier must have uploaded the invoice in their GSTR-1 so that it appears in your GSTR-2B.
Composition scheme for small businesses
Small taxpayers can choose the composition scheme and pay tax at a fixed percentage of turnover with much less paperwork.
- Open to businesses with turnover up to Rs. 1.5 crore (Rs. 75 lakh in some special category states)
- Rate is 1% for traders and manufacturers and 5% for restaurants
- Service providers with turnover up to Rs. 50 lakh can opt in at 6%
- You cannot charge GST on your invoice or claim input tax credit
- You cannot make sales to other states
GST returns you need to file
A regular taxpayer files GSTR-1 (details of sales) and GSTR-3B (summary and tax payment) every month or quarter, and GSTR-9 (annual return) once a year where applicable. Late filing attracts a late fee for every day of delay and interest on unpaid tax, and repeated non-filing can lead to cancellation of the GSTIN.
Frequently asked questions
What is the full form of GST?
GST stands for Goods and Services Tax. It is a single indirect tax on the supply of goods and services in India, in force since 1 July 2017.
What is the difference between CGST, SGST and IGST?
CGST and SGST are charged together on a sale within the same state and go to the Centre and the State. IGST is charged on a sale from one state to another and on imports.
Is GST registration required below the turnover limit?
Normally no. But some businesses, such as those selling goods to other states or selling through most e-commerce platforms, must register whatever their turnover.
Can a composition dealer claim input tax credit?
No. A composition dealer pays tax at a fixed rate on turnover and cannot charge GST on invoices or claim input tax credit.