What is the GST rate on most goods and services in India?

The most common GST rate is 18%, which applies to most services including IT, telecom, restaurants (non-AC), and many manufactured goods. 5% covers essential food and medicines. 12% covers processed food and business services. 28% applies to luxury goods and sin products like tobacco and vehicles.

Who must register for GST in India?

Any business with turnover above ₹40 lakh (goods) or ₹20 lakh (services) in a financial year must register. Threshold is ₹10 lakh for special category states (Northeast, Uttarakhand). Interstate sellers, e-commerce sellers, and certain service providers must register regardless of turnover.

What is Input Tax Credit (ITC) in GST?

ITC lets you offset the GST you paid on purchases against the GST you collect from customers. Example: you paid ₹18,000 GST on materials and collected ₹36,000 GST from customers — you only pay ₹18,000 to the government. This prevents cascading tax (tax on tax).

What is the penalty for not filing GST returns?

Late filing attracts a penalty of ₹50/day (₹25 CGST + ₹25 SGST) or ₹20/day for nil returns. Maximum late fee is ₹5,000. Interest at 18% p.a. applies on the tax payable from the due date. Not registering when required can attract a penalty of 10% of tax due (minimum ₹10,000).

GST

GST Explained — Complete Guide for Businesses & Consumers India 2026

Q: What is the difference between CGST, SGST, and IGST?

CGST (Central GST) and SGST (State GST) are levied on intra-state sales — each takes half the applicable GST rate. IGST (Integrated GST) is levied on inter-state sales at the full rate, then split between centre and destination state. The total tax burden on the buyer is the same either way.

By CalcBharat.com Finance Team · April 2026 · 11 min read

GST (Goods and Services Tax) replaced over 17 central and state taxes in India on July 1, 2017. It's India's most significant tax reform since independence. Yet many business owners and consumers still don't fully understand how it works, what rates apply, and what obligations they have.

This guide explains GST in plain language — from basic concepts to registration, filing, and Input Tax Credit.

What is GST and How Does It Work?

GST is a consumption-based tax — it's charged at the point where goods or services are consumed, not where they're produced. Every business in the supply chain collects GST from the next buyer and pays it to the government, but can claim back the GST they paid on their own purchases. This is called Input Tax Credit (ITC).

The result: GST is effectively paid only by the final consumer. Businesses are just collection agents for the government.

The Five GST Rates — What Falls Where

Rate	Category	Common Examples
0% (Exempt)	Essentials	Fresh vegetables, fruits, milk, eggs, fish, meat, healthcare, education services
5%	Basic goods & services	Packaged food, tea, coffee, edible oil, fertilisers, economy class air travel, non-AC restaurants
12%	Standard goods	Frozen meat, butter, cheese, mobile phones (most), computers, medicines, agarbatti
18%	Most services & goods	Restaurants (AC), hair salons, IT services, financial services, electronics, soaps, toothpaste
28%	Luxury & demerit goods	Cars, two-wheelers (>350cc), tobacco, pan masala, aerated drinks, casinos, race clubs

🔢 Calculate GST instantly: Use our Free GST Calculator — add or remove GST from any amount in seconds.

CGST, SGST, IGST — The Three Types of GST

GST is split between Central and State governments. The type depends on where the transaction happens:

CGST + SGST: For transactions within the same state (intra-state). Each is half the applicable rate. A ₹10,000 sale at 18% GST = CGST ₹900 + SGST ₹900.
IGST: For transactions between two different states (inter-state). Full rate applied. Same sale between states = IGST ₹1,800.
UTGST: Like SGST but for Union Territories without legislature (Dadra & Nagar Haveli, Daman & Diu, Lakshadweep, Chandigarh).

Input Tax Credit (ITC) — The Most Important GST Concept for Businesses

ITC is what makes GST different from the old VAT system. When you buy goods/services for your business and pay GST, you can deduct that GST from what you collect from your customers.

Example: You're a garment manufacturer. You buy fabric for ₹1,00,000 + 5% GST (₹5,000) = ₹1,05,000. You sell garments for ₹2,00,000 + 12% GST (₹24,000) = ₹2,24,000. Net GST you pay to government: ₹24,000 – ₹5,000 = ₹19,000.

Without ITC (old system), you'd pay ₹24,000. ITC saves you ₹5,000. Multiplied across every transaction in your supply chain, this eliminates cascading "tax on tax."

GST Registration — Who Must Register?

Category	Threshold
Goods supplier (most states)	Annual turnover above ₹40 lakh
Service provider (most states)	Annual turnover above ₹20 lakh
Special category states (NE, hilly regions)	Above ₹10 lakh for goods, ₹10 lakh for services
E-commerce sellers (Amazon, Flipkart, etc.)	Mandatory regardless of turnover
Inter-state supply of goods	Mandatory regardless of turnover
Casual taxable persons	Mandatory regardless of turnover

Voluntary registration is allowed even below the threshold — useful for businesses that want to claim ITC and look more professional to B2B clients.

GST Returns — What You Must File and When

Return	What It Covers	Due Date	Who Files
GSTR-1	Outward supplies (sales)	11th of next month (monthly) / 13th of quarter-end month (quarterly)	All regular taxpayers
GSTR-3B	Summary return + tax payment	20th of next month (monthly)	All regular taxpayers
GSTR-9	Annual return	December 31 of next FY	Turnover above ₹2 crore (others optional)
GSTR-4	Composition scheme return	30th April of next FY	Composition dealers

Composition Scheme — For Small Businesses

Businesses with turnover up to ₹1.5 crore can opt for the Composition Scheme — pay a flat tax (1% for traders, 2% for manufacturers, 5% for restaurants) on turnover with minimal compliance. The trade-off: you can't claim ITC and can't make inter-state supplies.

Penalties for GST Non-Compliance

Late filing: ₹50/day (₹20/day for nil returns), maximum ₹10,000 per return
Non-payment of tax: 18% interest per annum on unpaid amount
Wrong ITC claim: 100% penalty of the ITC wrongly claimed
Tax evasion: Penalty up to 100% of tax amount + possible prosecution

💰 Also calculate: Use our Income Tax Calculator to plan your total tax liability including income tax alongside GST.

👩‍💼

CalcBharat.com Finance Team

GST & Tax Compliance Experts

GST rules and rates verified as of April 2026. GST law changes frequently — consult a CA or tax professional for advice specific to your business. Always refer to gst.gov.in for official guidance.

What is the GST rate on most goods and services? +

18% is the most common rate, covering IT services, telecom, restaurants, and most manufactured goods. 5% covers essentials. 12% covers processed food and some business services. 28% applies to luxury goods, vehicles, and sin products like tobacco.

Who must register for GST? +

Businesses with turnover above ₹40 lakh (goods) or ₹20 lakh (services) per year must register. Interstate sellers, e-commerce sellers, and certain professionals must register regardless of turnover. Special category states (Northeast) have a lower ₹10 lakh threshold.

What is Input Tax Credit (ITC)? +

ITC lets you offset GST paid on purchases against GST collected from customers. If you paid ₹18,000 GST on inputs and collected ₹36,000 from customers, you only remit ₹18,000 to the government. It eliminates the cascading tax problem that existed before GST.

What is the difference between CGST, SGST, and IGST? +

For intra-state sales, CGST and SGST each take half the applicable rate. For inter-state sales, IGST is charged at the full rate. The buyer's total tax burden is identical. The difference is just how the revenue is split between the Centre and the state.

What is the penalty for late GST return filing? +

₹50/day (₹20/day for nil returns), up to a maximum of ₹5,000. Plus 18% p.a. interest on the outstanding tax. Non-registration when required attracts a penalty of 10% of tax due, minimum ₹10,000. File on time — the penalties compound quickly.