What is GST? A Simple Guide for India
Updated 2026-10-29
Quick answer: GST (Goods and Services Tax) is India's single indirect tax on the supply of goods and services, introduced on 1 July 2017. It is charged at each stage of the supply chain, but businesses claim credit for GST already paid, so the tax is ultimately borne by the final consumer.
How GST works
A seller adds GST to the price, collects it from the buyer and pays it to the government after subtracting the GST it paid on its own purchases (input tax credit).
CGST, SGST and IGST
For a sale within one state, the rate is split equally between the Centre (CGST) and the State (SGST). For a sale between states, the full rate is charged as IGST.
- Intra-state, 18%: 9% CGST + 9% SGST
- Inter-state, 18%: 18% IGST
Worked example
A product priced ₹10,000 before tax at 18% GST costs ₹11,800. If the ₹11,800 price already includes GST, the base is 11,800 ÷ 1.18 = ₹10,000 and the GST is ₹1,800.
Who needs to register?
Registration is generally mandatory when annual turnover exceeds ₹40 lakh for goods (₹20 lakh in special-category states) or ₹20 lakh for services (₹10 lakh in special-category states), and always for inter-state suppliers of goods and e-commerce sellers. Check the GST portal for current thresholds.
FAQs
Is GST charged on GST?
No. GST is calculated on the transaction value; it is not compounded on itself.