GST in India Explained: Rates, Slabs, ITC and Filing (2024-25)
India replaced a tangle of Central and State taxes with a single Goods and Services Tax (GST) in July 2017. Seven years later, it affects every business transaction in the country — yet the 4-slab rate structure, CGST/SGST split, and input tax credit rules confuse even experienced professionals. This guide explains how GST actually works, what gets taxed at which rate, and how to calculate your liability.
What is GST?
GST (Goods and Services Tax) is a destination-based, multi-stage tax levied on the supply of goods and services. It replaced multiple Central and State taxes including Central Excise Duty, Service Tax, VAT, Central Sales Tax, and several others, creating a unified national market.
"Destination-based" means the tax revenue goes to the state where the goods or services are consumed, not where they are produced. "Multi-stage" means GST is collected at each stage of the supply chain — but input tax credit (ITC) ensures that each registered supplier only pays tax on the value they added, not the full transaction value. This eliminates the cascading tax-on-tax effect that was the main problem with the old system.
GST has three components: CGST (Central GST, goes to the Union Government), SGST (State GST, goes to the State Government), and IGST (Integrated GST, for inter-state transactions). For most intra-state transactions, the GST rate is split equally: a 18% GST on a service = 9% CGST + 9% SGST.
The 4-Slab GST Rate Structure
India uses four main GST rates: 5%, 12%, 18%, and 28%. A small category of items attracts 0% (exempt or zero-rated), and the 28% slab often carries an additional cess on luxury and sin goods.
| Rate | Category | Examples |
|---|---|---|
| 0% (Exempt) | Essential goods & services | Fresh vegetables, milk, eggs, bread, books, newspapers, health services, education |
| 5% | Basic necessities | Packaged food, footwear under ₹1,000, economy hotel rooms, transport services, small restaurants |
| 12% | Standard goods | Processed food, mobile phones, computers, business class air travel, work contracts |
| 18% | Standard services & goods | Most services (IT, consulting, finance), most manufactured goods, restaurants (AC), appliances |
| 28% | Luxury & demerit goods | Cars, ACs, large TVs, tobacco, aerated drinks, casino/gambling services |
| 28% + Cess | High luxury / sin goods | Luxury cars (17% cess), cigarettes (5–36% cess), aerated drinks (12% cess) |
Source: GST Council (gst.gov.in)
How to Calculate GST: Add and Remove
There are two scenarios: you know the base price and want to find the final price (adding GST), or you know the final price and want to find the base price (removing GST).
Adding GST (price exclusive → inclusive)
Final Price = Base Price + GST Amount
Example: Base price ₹10,000, GST 18% → GST = ₹1,800, Final = ₹11,800
Removing GST (price inclusive → exclusive)
GST Amount = Final Price − Base Price
Example: Final price ₹11,800, GST 18% → Base = ₹10,000, GST = ₹1,800
CGST and SGST Split
For any intra-state supply (buyer and seller in the same state), the GST is split 50/50 between Central and State governments:
| Total GST | CGST | SGST | Applicable to |
|---|---|---|---|
| 5% | 2.5% | 2.5% | Intra-state supplies |
| 12% | 6% | 6% | Intra-state supplies |
| 18% | 9% | 9% | Intra-state supplies |
| 28% | 14% | 14% | Intra-state supplies |
| IGST = full rate | — | — | Inter-state supplies (IGST replaces CGST+SGST) |
Input Tax Credit (ITC): How It Reduces Your Tax
ITC is the mechanism that prevents double taxation. Every GST-registered business can deduct the GST it paid on its inputs (purchases) from the GST it collected on its outputs (sales).
Example: A manufacturer buys raw materials worth ₹1,00,000 + 18% GST = ₹18,000 GST paid. They sell finished goods worth ₹1,50,000 + 18% GST = ₹27,000 GST collected. Net GST payable to government = ₹27,000 − ₹18,000 = ₹9,000 (only the value-added portion).
ITC is available for business purchases but NOT for:
- Personal use or non-business expenses
- Motor vehicles (except for transport businesses)
- Food and beverages (except for restaurant businesses)
- Club memberships, cosmetic surgery, health services (unless for employees)
- Works contracts for construction of immovable property
GST Registration: Who Must Register?
| Business type | Registration threshold (annual turnover) |
|---|---|
| Goods supplier (most states) | ₹40 lakh |
| Service provider (most states) | ₹20 lakh |
| Special category states (NE India, J&K, etc.) | ₹10 lakh |
| E-commerce sellers (selling on Flipkart, Amazon, etc.) | Mandatory regardless of turnover |
| Inter-state supplier | Mandatory regardless of turnover |
| Casual taxable persons / non-resident suppliers | Mandatory regardless of turnover |
Voluntary registration is allowed even below the threshold — this lets smaller businesses claim ITC and sell to GST-registered buyers (who need a GST invoice to claim their own ITC).
GST Return Filing: Key Deadlines
| Return | Who files it | Due date |
|---|---|---|
| GSTR-1 | All regular taxpayers (outward supplies) | 11th of next month |
| GSTR-3B | All regular taxpayers (summary + tax payment) | 20th of next month |
| GSTR-9 | Annual return — all regular taxpayers | 31st December of next FY |
| GSTR-4 | Composition scheme taxpayers | 30th April of next FY |
| GSTR-7 | TDS deductors under GST | 10th of next month |
Late filing attracts interest at 18% p.a. on the tax due, plus a late fee of ₹50/day (₹20/day for nil returns), capped at ₹5,000 per return. Source: gst.gov.in
Composition Scheme: Simpler Filing for Small Businesses
Small businesses with annual turnover up to ₹1.5 crore (₹75 lakh for service providers) can opt for the Composition Scheme. Instead of filing detailed returns and managing ITC, they pay a flat rate:
- Manufacturers and traders: 1% of turnover (0.5% CGST + 0.5% SGST)
- Restaurants (not serving alcohol): 5% of turnover
- Service providers (CGST Amendment 2019): 6% of turnover
The trade-off: Composition dealers cannot collect GST from customers, cannot claim ITC, and cannot sell outside their state. Best for small businesses that sell primarily to end consumers.
Calculate GST instantly
Enter a price and select the GST rate to instantly add or remove GST, with automatic CGST/SGST split shown.
Open GST Calculator →This guide is for educational purposes. GST rates and rules change periodically. Always verify current rates with the GST Council or a qualified tax professional. Sources: GST Council of India (gst.gov.in), CBIC (cbic.gov.in).