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GST

Tax

Goods and Services Tax

A comprehensive indirect tax levied on the supply of goods and services in India, replacing a complex web of central and state taxes with a unified structure.

Definition

Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax levied on the supply of goods and services across India. It replaced a fragmented system of central and state taxes (such as VAT, Service Tax, Central Excise, Entry Tax, and Octroi) with a single, unified tax structure.

GST was implemented in India on 1 July 2017. It is administered under a dual structure — the Centre levies CGST and the State levies SGST on intra-state transactions. On inter-state transactions, the Centre levies IGST and distributes the state's share to the destination state.

The key principle of GST is that tax is paid at each stage of the supply chain but businesses can claim Input Tax Credit (ITC) for GST paid on their purchases, so the final tax burden falls only on the end consumer.

Formula

GST Amount = (Original Price × GST Rate) / 100

Price inclusive of GST = Original Price × (1 + GST Rate / 100)

To extract original price from a GST-inclusive price: Original Price = Inclusive Price / (1 + GST Rate / 100)

Worked Example

A restaurant bill shows a meal priced at ₹800 with 5% GST.

  • GST amount = ₹800 × 5 / 100 = ₹40
  • Total payable = ₹800 + ₹40 = ₹840

For a restaurant in the same state, this would be split as:

  • CGST: ₹20 (2.5%)
  • SGST: ₹20 (2.5%)

Use the GST calculator to compute GST-inclusive and GST-exclusive prices instantly.

Key Things to Know

  • GST vs income tax: GST is an indirect tax on consumption; you pay it as a consumer regardless of your income. Income tax is a direct tax on your earnings. They are entirely separate systems.
  • Reverse charge mechanism (RCM): In certain cases, the buyer (not the seller) is liable to pay GST. This applies when purchasing from an unregistered supplier or for specific services (legal fees, import of services, etc.).
  • E-way bill: Any movement of goods worth more than ₹50,000 within or between states requires an e-way bill generated on the GST portal.
  • GSTIN: Every GST-registered business gets a 15-digit Goods and Services Tax Identification Number (GSTIN). The first 2 digits are the state code, digits 3–12 are the PAN, and the remaining digits are entity-specific.
  • GST and TDS: GST TDS (different from income tax TDS) applies when government departments and certain notified entities make payments to GST-registered suppliers exceeding ₹2.5 lakh per contract.

Related Calculators

GST Calculator →Calculate GST on any amount instantly. Supports 5%, 12%, 18%, and 28% GST slabs. Shows CGST, SGST breakdown and total inclusive price.

Related Terms

TDSTax Deducted at Source
Frequently Asked Questions
What are the GST slabs in India?
GST in India has four main slabs: 0% (essential goods like raw food grains, books), 5% (packaged food, common use items), 12% (processed foods, business services), 18% (standard rate for most goods and services including restaurants, electronics), and 28% (luxury goods, automobiles, tobacco, aerated drinks). A few items like gold attract 3%.
What is the difference between CGST, SGST, and IGST?
CGST (Central GST) and SGST (State GST) are levied on intra-state supply of goods/services — each at half the total GST rate. IGST (Integrated GST) is levied on inter-state supply and imports, collected by the Centre and shared with states. For example, an 18% service in a restaurant within the same state would attract 9% CGST + 9% SGST.
Who needs to register for GST?
Any business with an aggregate annual turnover exceeding ₹40 lakh (goods) or ₹20 lakh (services) must register for GST. For certain special category states, the threshold is ₹10 lakh. Businesses making inter-state supplies must also register regardless of turnover.
What is Input Tax Credit (ITC) in GST?
Input Tax Credit allows a registered business to reduce the GST it owes on its output by the amount of GST already paid on its inputs (purchases). For example, a manufacturer who paid ₹18,000 GST on raw materials can offset this against the ₹27,000 GST collected on the finished goods, paying only ₹9,000 to the government.
Is GST applicable on exports?
No. Exports are zero-rated under GST. Exporters can either claim a refund of the GST paid on inputs or export under a bond/LUT (Letter of Undertaking) without paying GST. This ensures Indian goods and services remain competitive in global markets.