The Goods and Services Tax (GST) revolutionized India's taxation system in 2017, replacing a complex web of indirect taxes with a unified system. Whether you're a business owner, freelancer, or just want to understand your receipts better, this guide covers everything you need to know.

What is GST?

GST is a comprehensive indirect tax levied on the supply of goods and services in India. It replaced multiple taxes including:

Central Excise Duty
Service Tax
VAT (Value Added Tax)
Entry Tax
Octroi
And several other state/central taxes

Types of GST

CGST

Central GST — Collected by the Central Government on intra-state sales (within the same state).

SGST

State GST — Collected by the State Government on intra-state sales.

IGST

Integrated GST — Applied on inter-state sales (between different states) and imports.

GST Tax Slabs

India has a multi-tier GST structure with four main slabs:

Rate	Applicable Items	CGST + SGST Split
5%	Essential items, transport, economy hotels	2.5% + 2.5%
12%	Processed food, mobile phones, computers	6% + 6%
18%	Most services, electronics, financial services	9% + 9%
28%	Luxury items, automobiles, tobacco	14% + 14%

Additionally, certain essential goods like fresh food, books, and healthcare services are exempt from GST (0% rate).

How to Calculate GST

1. Adding GST (Exclusive Calculation)

When you have a base price and need to add GST:

Formula: Total = Base Price + (Base Price × GST Rate / 100)

Example: Product costs ₹1,000 at 18% GST

GST Amount = ₹1,000 × 18 / 100 = ₹180

Total Price = ₹1,000 + ₹180 = ₹1,180

2. Extracting GST (Inclusive Calculation)

When you have the total price including GST and need to find the base price:

Formula: Base Price = Total Price × 100 / (100 + GST Rate)

Example: Invoice shows ₹1,180 (inclusive of 18% GST)

Base Price = ₹1,180 × 100 / 118 = ₹1,000

GST Amount = ₹1,180 - ₹1,000 = ₹180

3. Reverse GST Calculation

When you only know the GST amount and need to find the base price:

Formula: Base Price = GST Amount × 100 / GST Rate

Example: GST charged is ₹180 at 18%

Base Price = ₹180 × 100 / 18 = ₹1,000

Practical Examples

Retail Purchase

You buy electronics worth ₹50,000 + 18% GST. CGST = ₹4,500 (9%), SGST = ₹4,500 (9%). Total = ₹59,000.

Service Invoice

A consultant bills ₹10,000 for services at 18% GST. If selling to a client in another state, IGST = ₹1,800. If same state, CGST + SGST = ₹900 + ₹900.

Restaurant Bill

Restaurant bill shows ₹1,180 for a meal (5% GST). Base = ₹1,180 × 100 / 105 = ₹1,123.81. GST = ₹56.19 (CGST ₹28.10 + SGST ₹28.10).

Input Tax Credit (ITC)

One of GST's biggest advantages is Input Tax Credit. Businesses can claim credit for the GST they pay on purchases against the GST they collect on sales, paying only the difference to the government.

Example: A retailer buys goods for ₹1,00,000 + ₹18,000 GST and sells them for ₹1,50,000 + ₹27,000 GST. They can claim ₹18,000 as ITC and pay only ₹9,000 (₹27,000 - ₹18,000) to the government.

Key Things to Remember

Intra-state = CGST + SGST — When buyer and seller are in the same state
Inter-state = IGST — When buyer and seller are in different states
CGST and SGST are equal — Each is exactly half of the total GST rate
Keep invoices — Required for claiming Input Tax Credit

Frequently Asked Questions

Who needs to register for GST?

Businesses with annual turnover exceeding ₹40 lakh (₹20 lakh for services, ₹10 lakh for special category states) must register for GST.

What is the Composition Scheme?

Small businesses with turnover up to ₹1.5 crore can opt for the Composition Scheme, paying tax at lower rates (1-5%) without claiming ITC.

When is IGST applied?

IGST applies when goods or services are supplied between different states, or for imports. The rate is the same as CGST + SGST combined.

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Complete GST Calculation Guide for India (2026)