GST was launched in India on 1 July 2017, replacing 17 different taxes. Despite being 8 years old, it still confuses millions of small business owners. This guide covers everything you need to know.
What is GST in Simple Terms?
GST is a tax on the "value you add." If you buy a product for ₹100 and sell it for ₹150, you pay GST only on the ₹50 you added — not the full ₹150. This prevents the cascading "tax on tax" problem that existed before 2017.
CGST vs SGST vs IGST — Explained Simply
| Type | When Applied | Goes To |
|---|---|---|
| CGST | Sale within same state | Central Government |
| SGST | Sale within same state | State Government |
| IGST | Sale to another state | Central (shared later) |
GST Rate Slabs 2025
| Rate | What's Included |
|---|---|
| 0% | Fresh vegetables, milk, eggs, books, salt |
| 5% | Medicines, packaged food, economy hotels, transport |
| 12% | Processed food, computers, mobile phones |
| 18% | IT services, telecom, restaurants, most services |
| 28% | Luxury cars, tobacco, aerated drinks |
Who Must Register for GST?
- Annual turnover above ₹40 lakh (goods) or ₹20 lakh (services)
- Anyone selling across state borders (any turnover)
- E-commerce sellers on Amazon, Flipkart (any turnover)
- Casual taxable persons running temporary businesses
Input Tax Credit (ITC) — Your Biggest GST Benefit
You can deduct the GST you paid on purchases from the GST you collect on sales.
Example: Buy materials for ₹1L + ₹18,000 GST. Sell goods for ₹1.5L + ₹27,000 GST. Net tax to pay: ₹27,000 − ₹18,000 = only ₹9,000. You saved ₹18,000 because of ITC.
GST Filing Deadlines — Never Miss These
- GSTR-1 (sales details): 11th of next month
- GSTR-3B (summary + payment): 20th of next month
- GSTR-9 (annual return): 31st December
- Late fee: ₹50/day (₹20/day for nil returns)
3 Common GST Mistakes to Avoid
- Wrong HSN code: Every product has a code — wrong code = wrong rate = penalty
- Missing ITC claims: Claims expire — file and claim every month
- Not reconciling GSTR-2A: You can only claim ITC if your supplier also filed returns
How to Calculate GST Percentage on a Product
The standard GST percentage formula is straightforward — add the slab to the base price. For an 18% slab on a ₹1,000 base product: GST = 1000 × 18 ÷ 100 = ₹180. Total = ₹1,180.
To learn how to calculate 18 percent GST quickly, divide the base by 100 and multiply by 18, or just multiply the base by 0.18.
How to Calculate GST from Total Amount (Reverse GST)
When a price is GST-inclusive (e.g. an MRP), use this reverse formula:
So if a product's MRP is ₹1,180 inclusive of 18% GST, the base price = 1180 ÷ 1.18 = ₹1,000 and the GST portion = ₹180. This is exactly how to calculate GST on MRP for any retail product.
How to Calculate GST on Medicine and Gold
- Medicine: Most fall under 5% GST; some life-saving drugs are 0%. For a ₹500 medicine at 5% GST, the tax is ₹25.
- Gold: 3% GST on the gold value + 5% GST on making charges. On ₹1,00,000 gold with ₹10,000 making charges = ₹3,000 + ₹500 = ₹3,500 total GST.