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What Is GST? A Simple Guide for Small Businesses in India

GST stands for Goods and Services Tax. It is an indirect tax charged on the supply of goods and services in India, and it replaced many older taxes such as VAT, service tax and excise duty. The idea is one nation, one tax, collected at every step but paid only on the value you add.

How GST works in simple words

Suppose you buy goods for โ‚น10,000 plus GST and sell them for โ‚น12,000 plus GST at the same rate. You collect GST from your customer on โ‚น12,000 and you have already paid GST on โ‚น10,000. You deposit only the difference, which is the tax on your โ‚น2,000 of added value. The GST you paid on purchases is called input tax credit.

Types of GST

  • CGST (Central GST) and SGST (State GST) are charged together when you sell within the same state.
  • IGST (Integrated GST) is charged when you sell to another state or import or export.

Details with examples are in CGST, SGST and IGST explained.

Who needs to register for GST?

Businesses must register when their yearly turnover crosses the government's threshold, and in some cases irrespective of turnover (for example, certain interstate suppliers and e-commerce sellers). Read GST registration limit in India for the current limits.

What does a GST-registered business have to do?

  1. Issue correct invoices with GSTIN, HSN or SAC code, tax rate and amounts. See GST invoice format and mandatory fields.
  2. File returns on time (usually monthly or quarterly, depending on your scheme).
  3. Pay the tax after adjusting input tax credit.
  4. Keep records of invoices, purchases and payments.

GST rates

Different goods and services attract different rates. India's slab structure was simplified in September 2025. See GST rates in India.

Tools to make GST easy

This article is general information, not tax advice. Rules change, so confirm details on the official GST portal or with a qualified CA.