The Goods and Services Tax (GST) replaced a tangle of older indirect taxes in 2017 and is now the single tax every growing business in India has to understand. If you run a shop, a service business or a small manufacturing unit, this guide covers the essentials in plain language — without the jargon.
What is GST, really?
GST is a single indirect tax on the supply of goods and services. It is a destination-based tax, which means it is collected by the state where the goods or services are finally consumed. Crucially, it is charged at every stage of the supply chain — but businesses get credit for the tax they already paid on their purchases, so tax is effectively only paid on the "value added" at each step.
Do you need to register for GST?
Registration is mandatory once your turnover crosses the threshold:
- ₹40 lakh annual turnover for businesses supplying goods (₹20 lakh in some special-category states).
- ₹20 lakh annual turnover for service providers (₹10 lakh in special-category states).
- Registration is compulsory regardless of turnover if you sell across states, sell online through marketplaces, or are required to pay tax under reverse charge.
Even below these limits, many small businesses register voluntarily — because without a GSTIN they cannot claim input tax credit or issue proper tax invoices, which larger customers often demand.
The GST tax slabs
Goods and services fall into different rate slabs. The main ones are:
| Slab | Typical items |
|---|---|
| 0% (exempt) | Fresh food, milk, books, healthcare, education |
| 5% | Essential goods, transport, small restaurants |
| 12% | Processed food, computers, business-class travel |
| 18% | Most goods and services (the standard rate) |
| 28% | Luxury and "sin" goods — cars, tobacco, aerated drinks |
CGST, SGST and IGST — what's the difference?
For a sale within the same state, GST is split into two halves: CGST (goes to the central government) and SGST (goes to the state). For a sale between two states, a single IGST is charged instead. As a business owner you charge the correct type automatically based on where your customer is — good billing software handles this for you.
Input Tax Credit (ITC): the key to not overpaying
This is the single most important concept for a small business. When you buy goods or services for your business, you pay GST on them. Input Tax Credit lets you subtract that tax from the GST you collect from your customers, so you only deposit the difference with the government.
For example, if you collected ₹18,000 GST from customers this month and paid ₹11,000 GST on your purchases, you only deposit ₹7,000. To claim ITC you must have valid tax invoices and your supplier must have actually filed their returns — which is why buying only from GST-compliant vendors matters.
GST return due dates
Most small businesses file two main returns:
- GSTR-1 — details of your sales (outward supplies), usually by the 11th of the next month (or quarterly under the QRMP scheme).
- GSTR-3B — a summary return with your tax payment, usually by the 20th of the next month.
Filing late attracts a per-day late fee plus interest, so mark these dates in your calendar.
The Composition Scheme for very small businesses
If your turnover is under ₹1.5 crore, you can opt for the Composition Scheme and pay a small flat percentage of turnover (1–6%) instead of the regular GST process. It means far simpler filing, but you cannot claim input tax credit or make inter-state sales. It suits local shops and small traders who sell mainly to end consumers.
Common mistakes that get businesses penalised
- Not registering after crossing the turnover limit.
- Charging the wrong slab or wrong tax type (CGST/SGST vs IGST).
- Claiming ITC on invoices where the supplier never filed returns.
- Missing return due dates and letting late fees pile up.
- Not reconciling sales in the books with what was reported in GSTR-1.
Frequently asked questions
Yes, registering on the GST portal is free. Many businesses use a CA or software to manage filings, which is a separate cost.
You accumulate late fees and interest, your GSTIN can be suspended, and your customers lose the ability to claim ITC on your invoices — which can cost you business.
Yes. Good billing and accounting software automatically applies the correct slab, splits CGST/SGST/IGST, tracks ITC and generates return-ready reports. Shronix's ShronixBill is built for exactly this.
This article is for general education only and is not tax or legal advice. GST rules, rates and thresholds change; always confirm current provisions on the official GST portal or with a qualified professional before acting.