GST in India: A Simple Guide to Rates, Registration, Filing, and Input Tax Credit

GST Made Simple

The Goods and Services Tax (GST) replaced a confusing web of state and central taxes in 2017. But even after 9 years, many small business owners find it confusing. This guide breaks it down in plain language.

The New GST Slab Structure (2026)

Effective September 2025, GST has been simplified to mostly 2 main slabs:

Rate	What It Covers
0% (Nil)	Essential items: fresh fruits, vegetables, milk, bread, unbranded grains
5%	Mass consumption items: packaged food, economy hotels, transport tickets, small restaurants
18%	Most goods and services: electronics, financial services, restaurants with AC, professional services, software
40%	Demerit goods: luxury cars, tobacco, aerated drinks, high-sugar beverages

The old 12% and 28% slabs have been largely merged into 5% and 18% respectively.

Who Needs to Register for GST?

• Service providers: Annual turnover above ₹20 lakh (₹10 lakh in special category states like NE states, Himachal, etc.)
• Goods sellers: Annual turnover above ₹40 lakh (₹20 lakh in special category states)
• E-commerce sellers: Mandatory registration regardless of turnover
• Interstate suppliers: Mandatory registration regardless of turnover

How to Register for GST (Free, Online)

Registration is free on the official GST portal and usually takes a few working days:

1. Go to gst.gov.in and start a new registration with your PAN, mobile number and email.
2. Verify with the OTP to get a Temporary Reference Number (TRN).
3. Fill in your business details and upload documents (PAN, proof of business address, bank details, photo).
4. Complete Aadhaar authentication (fastest) or e-sign.
5. Once approved, you receive your 15-digit GSTIN.

Even below the threshold, voluntary registration can be worth it — it lets you claim input tax credit and makes your business look more credible to larger clients who themselves want ITC.

Input Tax Credit (ITC) — The Core Benefit of GST

ITC is what makes GST work for businesses. The concept is simple:

• You charge GST to your customers (output tax)
• You pay GST on your business purchases (input tax)
• You only pay the government the difference (output minus input)

Example: You sell a product for ₹1,000 + 18% GST (₹180). You bought raw materials for ₹600 + 18% GST (₹108). You pay the government: ₹180 - ₹108 = ₹72.

2026 rule: ITC claims are now validated against your supplier's GSTR-2B filing. If your supplier does not file their returns, you cannot claim that ITC.

What you cannot claim ITC on: GST paid on personal expenses, most motor vehicles, food and catering, club memberships, and goods given as free samples or gifts are “blocked credits” under Section 17(5) — these cannot be offset against your output tax.

GST Filing Calendar

Return	Frequency	Due Date	Who Files
GSTR-1	Monthly	11th of next month	All registered businesses
GSTR-3B	Monthly	20th of next month	All registered businesses
GSTR-9	Annual	31st December	All (turnover above ₹2 crore needs audit)

Composition Scheme: Small businesses with turnover under ₹1.5 crore can opt for the composition scheme — pay a flat 1-6% tax with quarterly filing. Simpler but no ITC benefit.

Common GST Mistakes to Avoid

• Not filing nil returns: Even if you had no sales, you must file GSTR-3B. Late fee: ₹50/day (₹20 for nil returns).
• Claiming ITC from non-compliant suppliers: Check your GSTR-2B regularly.
• Mismatch between GSTR-1 and GSTR-3B: Discrepancies trigger notices.
• Not reconciling with income tax: Your GST turnover and ITR income should match.

Frequently Asked Questions

What are the GST slabs in India now?

After the September 2025 rationalisation, GST mainly uses two slabs — 5% for mass-consumption items and 18% for most goods and services — plus 0% on essentials and a 40% rate on demerit and luxury goods. The old 12% and 28% slabs were largely merged into 5% and 18%.

What is the GST registration limit?

₹40 lakh annual turnover for goods sellers and ₹20 lakh for service providers (₹20 lakh and ₹10 lakh respectively in special-category states). E-commerce and interstate suppliers must register regardless of turnover.

What is Input Tax Credit (ITC)?

ITC lets you deduct the GST you paid on business purchases from the GST you collected on sales, so you pay only the difference to the government. You can claim it only if your supplier has filed their returns, so it appears in your GSTR-2B.

Do freelancers and small service providers need GST?

Only if your annual receipts cross ₹20 lakh (₹10 lakh in special-category states), or you supply services across states or through e-commerce platforms. Below that, GST registration is optional — see our freelancer tax guide.

What is the penalty for not filing GST returns?

A late fee of ₹50 per day (₹20 per day for nil returns) plus 18% annual interest on any unpaid tax. Persistent non-filing can lead to cancellation of your GST registration.

What is the composition scheme?

A simplified option for businesses with turnover under ₹1.5 crore — pay a flat 1–6% of turnover with quarterly filing, but you cannot claim input tax credit or charge GST separately to customers.

Related Reading

• Tax Planning for Freelancers — GST for service providers
• TDS Guide — how TDS and GST interact
• Tax Calculator

Disclaimer: GST rules change frequently via council notifications. Rates mentioned reflect the September 2025 GST rationalisation and are current for 2026. Consult a GST practitioner for business-specific advice. This article is for educational purposes only.