Tax guide
GST Guide for Businesses
A clear, jargon-free walkthrough of the Goods and Services Tax: who needs to register, the rate slabs, the difference between CGST, SGST and IGST, how to issue a compliant GST invoice, how input tax credit works, and how often you need to file.
What is GST?
GST, or Goods and Services Tax, is a single, destination-based indirect tax levied on the supply of goods and services. It replaced a tangle of earlier central and state taxes — excise duty, service tax, VAT, octroi and others — with one unified structure. Because it is destination-based, the tax accrues to the state where the goods or services are consumed, not where they are produced. GST is charged at every stage of the supply chain, but input tax credit ensures that the tax is only paid on the value added at each stage, avoiding the cascading effect that plagued the older regime.
Who needs to register for GST?
Registration is mandatory once your aggregate turnover crosses the threshold — generally 20 lakh for service providers and 40 lakh for goods suppliers in most states, with a higher threshold of 10 lakh for north-eastern and special-category states. Certain businesses must register regardless of turnover: inter-state suppliers, e-commerce operators and sellers, agents working on behalf of taxable persons, and businesses liable to pay tax under the reverse charge mechanism.
Voluntary registration is also possible. It lets you claim input tax credit on your purchases, but it comes with the full compliance burden — monthly or quarterly returns, invoices in the prescribed format, and annual reconciliation. Weigh the input credit benefit against the cost of compliance before opting in.
GST rate slabs
Essential goods like unbranded food grains, books, and basic healthcare and education services.
Packaged food, edible oil, sugar, life-saving drugs, footwear up to a price cap, and economy transport.
Processed food, computers, mobile phones, butter, ghee and business-class air travel.
Most goods and services fall here: hair oil, soaps, IT services, financial services, telecom and restaurants without input credit.
Luxury and sin goods: automobiles, motorcycles, tobacco, aerated drinks and large household appliances.
A small set of items — petroleum products, alcohol for human consumption and a few others — are outside GST for now and continue under their earlier tax regimes. Cess is added on top of the 28% rate for luxury and sin goods.
CGST, SGST and IGST explained
GST is split into three components depending on whether a transaction is intra-state or inter-state. For a sale within a state, the tax is divided equally into Central GST (CGST, collected by the centre) and State GST (SGST, collected by the state). For a sale across state borders, the entire tax is collected as Integrated GST (IGST) by the centre and later apportioned to the consuming state. For example, a 1,000 rupee service billed at 18% within Karnataka would carry 90 as CGST and 90 as SGST. The same service billed from Karnataka to Maharashtra would carry 180 as IGST. The total tax is identical; only the split changes.
How to make a GST invoice
A GST tax invoice must contain specific fields for the recipient to claim input tax credit. The list below covers the essentials; the dedicated tax invoice generator on Invoice Generator formats these fields automatically.
- Supplier's name, address and GSTIN
- Recipient's name, address and GSTIN (if registered)
- Invoice number, issue date and place of supply
- Description, quantity and unit price per line
- HSN or SAC code for each item
- Taxable value, CGST, SGST and IGST per line
- Total invoice value in figures and words
- Whether tax is charged under reverse charge
- Supplier's signature or digital signature
Input tax credit
Input tax credit is the mechanism that prevents the cascading of tax. When you buy goods or services for your business, the GST you pay on those purchases can be set off against the GST you collect on your sales. To claim it, your supplier must have actually deposited the tax and filed their return, the invoice must be in your name with your GSTIN, and the goods or services must be used for your business. Reconciliation between your purchase register and the auto-populated GSTR-2B is essential — credits that do not match will not be allowed. Some inputs are blocked from credit, including motor vehicles (with exceptions), club memberships, and works contract services for construction of immovable property.
Filing frequency
Regular taxpayers file GSTR-1 (outward supplies) monthly, by the 11th of the following month, and GSTR-3B (summary return and tax payment) monthly by the 20th. Small businesses enrolled in the QRMP scheme can file GSTR-1 and GSTR-3B quarterly, with monthly tax payment for turnovers above 50 lakh. An annual return, GSTR-9, is due by 31 December of the following financial year for most regular taxpayers.
Composition dealers file a single quarterly return, CMP-08, and an annual GSTR-4. Non-resident taxable persons, e-commerce operators and input service distributors each have their own return types and due dates. Late filing attracts a fee and interest on unpaid tax, so calendar every due date in advance.