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What is Goods and Services Tax (GST) in India?
The idea for the Goods and Services Tax (GST) originated in 2000 to unify India’s complex tax system by consolidating various taxes into a single tax. After years of planning, GST finally came into effect on July 1, 2017.
In 2025, the Indian government introduced significant changes to enhance and simplify the GST system, aiming to make it more efficient and user-friendly.
Why is GST Important?
It is important because it managed to bring India under one tax umbrella, which led to international confidence in Indian goods and services. It also made business incredibly easy to do within the country, as enterprises now had one common taxation scheme under which they could operate.
In this guide, we will discuss all the aspects of GST, including how you can register for it and how to calculate it. Let’s get started!
What is GST in India?
GST stands for Goods and Services Tax which came into effect on 1st July 2017. This is indirect taxation, which an end consumer usually pays.
GST replaced many other indirect taxes such as excise duty, VAT, service tax, entry tax and luxury tax.
In brief, this tax is levied on the supply of goods and services. It is calculated on the value added to any goods. Goods and Services Tax in India is a comprehensive, destination-based and multi-stage tax added on every value addition.
Let's take a complete look into what these various terms mean, thereby understanding what GST is all about.
- Comprehensive - GST covers every aspect of sale and purchase. It replaced various other taxes. It is called comprehensive because it encompasses every aspect of commercial life.
- Destination-based - GST is levied in a state where the product is sold rather than the state where it was manufactured. For example, if these goods were produced in West Bengal and sold in Andhra Pradesh, the GST will be levied and collected in Andhra Pradesh.
- Multi-stage - In the production of any goods or services, there are usually plenty of stages. These stages include the procurement of raw materials, production or manufacture, warehousing, selling to wholesalers, retailers and finally, the end consumers. At every stage, GST is levied. This makes it a multi-valued tax.
- Value addition - Let's take an example of textile production. First, raw materials such as cotton or silk are taken and made into cloth. This increases the value of the raw materials. Then the fabric is designed into clothes which further enhances their value. After the dresses are made, they are branded and sold to retailers who advertise and market them, thereby increasing their value. GST is levied on each of these stages where value is added to the product.
With this understanding of what is GST tax, you can go on to understand different types of GST.
GST New Rate List in India 2025
The GST Council has introduced a landmark reform effective September 22, 2025, rationalising the tax structure into primarily three slabs. The previous rates of 0%. 5%. 12%, 18%, and 28% have been streamlined. The new structure aims to simplify compliance, remove anomalies, and make everyday items more affordable.
The primary tax slabs are now:
Here are the different slabs of GST and the various goods and services that fall under these categories. This list includes both new and pre-existing items.
Goods and Services Available at 0% or Exempt from GST
- Food Items: UHT milk, pre-packaged paneer, roti, paratha, khakra, pizza bread
- Education: School and university education remain exempt. Essential learning materials like pencils, erasers, exercise books, maps, and charts are now GST-free.
- Healthcare: Specific life-saving drugs (e.g., Agalsidase Beta, Imiglucerase).
- Insurance: All individual health and life insurance policies, including term plans, endowment policies, and ULIPs, are now exempt.
Goods and Services Available at 5% GST
- Food & Beverages: Edible oil, spices, tea, coffee, butter, ghee, cheese, dairy spreads, pre-packaged namkeens, chocolates, pasta.
- Household & Personal Care: Domestic LPG, Hair oil, shampoo, toothpaste, toilet soap, handbags, utensils, furniture, toys.
- Healthcare & Childcare: Essential medicines, medical-grade oxygen, diagnostic kits, corrective spectacles, thermometers, feeding bottles, baby napkins.
- Textiles & Apparel: Apparel up to ₹2,500 per piece, carpets, and other textile floor coverings.
- Other Sectors: Agriculture machinery (tractors, drip irrigation), bicycles, small residential hotel stays (₹1,001 - ₹7,500 per night), and gym/fitness services.
Goods and Services Available at 18% GST
- Electronics & Appliances: Air conditioners, televisions (above 32"), monitors, dishwashing machines.
- Automobiles: Small cars, motorcycles and scooters up to 350cc, three-wheelers, and commercial vehicles.
- Industrial Goods: Cement, various industrial electronics, and transformers.
- Other Items: Notebooks and exercise books (previously 12%), apparel and textile products above ₹2,500 per piece.
Goods and Services Available at 40% GST
- Sin Goods: Tobacco products, pan masala, cigarettes, cigars.
- Beverages: Aerated waters, caffeinated beverages, carbonated fruit drinks, and other non-alcoholic sugary beverages.
- Luxury & High-End Items: Motorcycles above 350cc, luxury cars, aircraft and yachts for personal use.
- Entertainment: Cinema tickets above ₹100, admission to casinos, and race clubs.
Note: Beside these main slabs, niche rates of 0.25%, 1.5% and 3% continue to exist for specific items like precious stones, gold and diamonds.
Old GST vs New GST Tax Rates
India's Goods and Services Tax (GST) system underwent a major overhaul on September 22, 2025, with the launch of GST 2.0. Here's a clear comparison between the previous GST structure and the new GST regime:
List of Items Cheaper Under GST 2.0
Thanks to revised tax slabs, several everyday items and services now attract lower GST rates:
- Personal Health & Life Insurance - Now GST-exempt
- Daily Essentials - Hair oil, shampoo, toothpaste, soaps, packaged food items
- Footwear & Apparel - Priced below ₹2,500
- Small Automobiles - Cars (≤1,200cc) and bikes (≤350cc)
- Household Appliances - ACs, TVs, refrigerators, washing machines
- Stationery & Bicycles - Moved to lower or zero GST slabs
What Remains the Same?
Some categories continue under existing GST rates:
- Basic Food Items - Milk, bread, vegetables (still exempt or taxed minimally)
- Services Under 18% Slab - Restaurants, financial services, education, telecom
List of Items Costlier Under GST 2.0
Luxury and sin goods have seen a significant hike in GST rates:
- Luxury Vehicles - High-end cars and imported automobiles
- Tobacco & Alcohol Products - Now taxed at 40% GST
- High-End Lifestyle Goods - Designer watches, diamonds, online gaming & betting platforms
What are the Types of GST in India?
There is a four-fold break-up of goods and services tax in India. It oversees the levy of tax for central government GST, GST for states, union territories, and the integrated goods and services tax. You can check out the details of these below.
- Central Goods and Services Tax (CGST) - The central government levies a CGST on goods and services transactions. It is levied along with the State Goods and Services Tax and the Union Territory Goods and Services Tax. These are shared between the state and centre. For example, if you are a Mumbai-based trader selling to another Mumbai-based trader for an amount of Rs.50,000 with a GST calculated at 18%, then 9% will go to the state's coffers, and the other 9% will go to the central government's coffers.
- State Goods and Services Tax (SGST) - It is calculated for intrastate goods and services transactions. The State Government keeps all of this tax that is levied. This tax replaces the other previous taxes such as VAT, octroi, luxury, entertainment and purchase tax.
- Integrated Goods and Services Tax (IGST) - Integrated Goods and Services Tax is the tax that is levied on service transactions and inter-state goods. It applies to exports and imports too. Both the state and the center take their respective shares of the tax. SGST part of the tax goes to that state where the goods or services are consumed.
- Union Territory Goods and Services Tax (UTGST) - Union Territory Goods and Services Tax is the same as State Goods and Services Tax except that it is levied in the Union Territories of the country rather than the states. So expect to pay this tax in Pondicherry, Daman and Diu, etc.
What is GST Registration?
For businesses that supply goods only, the compulsory GST registration turnover limit is ₹40 lakhs per year. For service-based businesses, this threshold is ₹20 lakhs. In special category states, this limit is ₹10 lakhs. This process is called GST registration and typically takes between 3-6 working days.
Who Must Register for GST?
Note: Service providers can opt for the composition scheme at a 6% rate if their turnover is up to ₹50 lakh (Pice). This scheme helps small businesses pay lower taxes and reduces compliance requirements.
How to Register for GST?
Every individual or business has to register for GST. You will have to apply with the Goods and Services Network (GSTN). Once you have registered, you will receive a Goods and Services Tax Identification Number. This is a 15 digit number that is issued state-wise once you have completed the registration.
Documents Required for GST Registration Process Online
Some of the documents that you will require while registering for GST are:
- An applicant’s PAN card
- Pan, Voter, or Aadhaar card of the promoters and partners
- Photo of the applicant
- A business address proof in the form of a lease agreement, rent, or other utility bills
- Account statement of the firm, or individual or company
- Partnership deed or incorporation certificate
How to Apply for GST Registration Online?
PART A of Registration:
Follow these steps to apply for GST registration online.
- Go to the GST portal https://www.gst.gov.in/ .
- Select the "Services" tab.
- Choose "Registration" and then select "New Registration."
- Under the drop-down menu for "I am a," select "Taxpayer."
- Fill the form GST REG-01 for the new registration, and enter the details of your business, state, email address, mobile number and PAN card.
- A one-time password will be sent to your mobile. Enter that password and select "Proceed."
- When you complete this level, you will have to go to another process called part B.
- You will receive a Temporary Reference Number (TRN) after verification.
This is how you complete the application for the GST number.
PART B of the Registration:
- To start the registration under PART B, you need to login with the TRN.
- Enter the Captcha code.
- Complete the OTP verification with the OTPs sent to the email id and the registered mobile number.
- Then you will be redirected to the GST registration page.
- Next, the details of your business need to be given, such as the name of your Business or Company.
- Add other information such as PAN number and the state where your business is to be set up.
- If you have any existing registrations, mention them and the date when the business will commence.
- In the next step, the names and details of up to ten business partners or promoters need to be mentioned.
- In case of a sole proprietorship, the PAN, Aadhar, DIN (Director Identification Number) and personal details have to be provided.
- In case someone else is filing your GST returns, their details have to be furnished.
- The address of the premises, official contact information and nature of the property need to be filled in.
- The company's bank account details, details of the services and details of any other places of the same business have to be filled in.
- The "type of business" needs to be specified. All these details are to be entered under the correct heading.
- Click on the "Save and continue" button. After it is submitted, you will need to provide your digital signature or sign using an EVC (one time code).
- Click on "Submit."
- You will now receive your ARN (Application Reference Number ) by email or SMS to confirm the registration of your application.
How to Calculate the GST Amount?
The following formulae is needed for calculating the GST before the application of GST and after the removal of GST. Here's how GST is calculated.
Formulae for adding GST
GST Amount = (Original Cost x GST Rate)/100
Net Price = Original Cost + GST Amount
Example: If a product costs ₹1,000 and GST is 18%:
GST Amount = (1,000 × 18) / 100 = ₹180
Net Price = 1,000 + 180 = ₹1,180
Formulae for removing GST
GST Amount = Original Cost – [Original Cost x {100/(100+GST Rate)}]
Net Price = Original Cost – GST Amount
Example: If the final price is ₹2,180 with 18% GST
Then, GST Amount = 2,180 – [2,180 × {100 / (100 + 18)}] = 2,180 – 1,847 = ₹333
Original Price = 2,180 - 333 = ₹1,847
You can also find several GST tax calculators online.
What are the Benefits of GST?
The GST system has brought numerous advantages to various stakeholders:
Benefits to the Government
- Unified National Market: GST brought all of India's markets under one tax system, creating confidence in the international market for Indian products
- Increased Foreign Investment: The simplified tax structure has boosted foreign investment
- Enhanced Export-Import: Indian products can reach global markets more easily
- Better Tax Compliance: Digital infrastructure has reduced tax evasion
- Simplified Tax Administration: Reduced complexity in tax collection and monitoring
Benefits to Businesses
- Simplified Tax Structure: Fewer slabs mean simpler invoicing, fewer classification disputes, and smoother compliance (Bank)
- Input Tax Credit: Seamless credit flow across the supply chain
- Reduced Logistics Costs: Elimination of inter-state check posts
- Easier Interstate Trade: No separate state-wise registration required
- Lower Tax Burden: Elimination of cascading tax effect
- Digital Compliance: Simplified online filing and payment systems
- Composition Scheme: Reduced compliance burden for small businesses
Benefits to Consumers
- Lower Prices: Elimination of tax-on-tax has reduced prices for many products
- Transparency: Clear tax structure makes pricing more transparent
- Cheaper Essential Goods: Many daily-use items moved to lower tax slabs
- Affordable Services: Services have become more affordable
- Organized Sector Growth: Better quality products from organized manufacturers
- Consumer Protection: Better tracking of goods and services
Benefits of GST 2.0 Reforms (2025)
- Further Simplification: Two-tier structure (5% and 18%) makes compliance easier
- Relief to Common Man: Daily essentials have dropped from 12%/18% to lower rates (Bajaj Finserv)
- Boost to MSMEs: Reduced compliance costs and simpler procedures
- Sector-Specific Benefits: Textiles, fertilizers, renewable energy, automotive, handicrafts, agriculture, health, and insurance sectors benefit significantly (Cleartax)
What is GST Return?
All businesses must file monthly, quarterly, or annual GST returns online. A GST return is a document containing details of sales, purchases, expenses, and income of every business or person with a GSTIN. Tax authorities use this document to calculate net tax liability. Types of GST returns:
- GSTR-1: Details of outward supplies (monthly/quarterly)
- GSTR-3B: Summary return (monthly)
- GSTR-4: Quarterly return for composition taxpayers
- GSTR-9: Annual return
- GSTR-9C: Reconciliation statement (for turnover above Rs.5 crore)
The filing frequency depends on turnover and business type. From April 1, 2025, e-invoice reporting through the Invoice Registration Portal (IRP) has been extended to those with aggregate annual turnover above Rs.10 crore (previously Rs.100 crore).
GST Helpline Number and Official Details
1. You can call the GST Helpline Numbers, which are given below and contact the government authorities to help with GST filing.
2. Here are some of the key email contacts that you can contact for the filing of your GST.
3. GST Self Service Portal
Under the Services→User Services section of the official GST portal https://www.gst.gov.in/, You can fill out the grievances in the form along with your details and complaint, which will then be addressed.
GST has successfully united India under the "One Nation, One Tax" vision. The 2025 reforms, known as GST 2.0, have further simplified the taxation system into a two-tier structure, making it more business-friendly and consumer-centric.
The transformation from a complex multi-slab system to the current streamlined structure demonstrates the government's commitment to ease of doing business. Whether you are a small business owner, a large enterprise, or a consumer, understanding GST is crucial in today's economy.
Frequently Asked Questions
Who is liable for GST in India?
The supplier of the goods or services is liable to pay the GST. This is, however, charged to the end consumer but is paid over to the government by the supplier. However, there are cases where the tax is to be paid by the recipient under the reverse charge mechanism.
Which taxes have been subsumed into GST?
Excise duty, service tax, countervailing duty, special additional duty of customs, luxury tax, octroi tax, entry and entertainment tax, VAT, tax on lottery, betting and gambling at the state and central level have been combined into GST.
What is the minimum amount for GST?
The minimum amount for a business to file for GST Rs.20 lakhs. Any company that has an annual turnover of this amount needs to file for GST. They can do so online using the GST portal.
Can I do business without GST?
No, you can't do business without following the GST guideline. You need to get your business registered under the guidelines, and failure to do so can result in the payment of penalties.
What are the current GST rates in 2025?
After the GST 2.0 reforms in September 2025, the main tax slabs are:
- 0% - Exempted goods and services
- 5% - Essential goods and merit-rated items
- 18% - Standard rate for most goods and services
- 40% - Luxury and sin goods (cigarettes, tobacco, premium cars, yachts, etc.)
- Special rates: 0.25%, 1.5%, and 3% for specific items like precious stones, gold, and diamonds
What were the old GST rates before 2025 reforms?
Before the 2025 reforms, GST had multiple slabs: 0%, 5%, 12%, 18%, and 28%. The 12% and 28% slabs were eliminated in the GST 2.0 reforms.
Is GST registration free?
Yes, GST registration is completely free. You don't need to pay any fees to register for GST through the official GST portal.
Can I claim ITC on all expenses?
No, ITC cannot be claimed on motor vehicles for personal use, food and beverages, outdoor catering, membership of clubs, health and fitness centres, travel benefits to employees (except on official duty), life insurance and health insurance, and works contract services for personal use.
What are the GST rates under the Composition Scheme?
Under the GST Composition Scheme, tax rates are:
- 1% for traders/manufacturers (0.5% CGST + 0.5% SGST)
- 5% for restaurants (non-alcoholic)
- 6% for service providers (3% CGST + 3% SGST)
Who is eligible for Composition Scheme?
Businesses with turnover up to ₹1.5 crore (₹75 lakh in special category states) are eligible for the GST Composition Scheme. They must not make inter-state supplies, sell through e-commerce platforms, or deal in restricted goods like tobacco. Service providers are eligible up to ₹50 lakh turnover.
Can I revoke GST registration cancellation?
Yes, you can apply for revocation of cancellation in Form GST REG-21 within 30 days from the date of service of the cancellation order.
How long does it take to get GST refund?
The GST refund should be processed within 60 days from the date of application. If not processed within 60 days, interest is payable.
Is GST applicable on rental income?
Yes, GST is applicable on commercial property rent if the annual turnover exceeds ₹20 lakhs. Residential property rent is generally exempt.
Is GST applicable on education services?
Services provided by educational institutions up to higher secondary are exempt from GST. However, certain commercial training and coaching services attract GST at 18%.
Is GST applicable on healthcare services?
Healthcare services provided by clinical establishments, authorised medical practitioners, and paramedics are generally exempt from GST. However, cosmetic surgery and commercial healthcare services may attract GST.
What is GST on online purchases (e-commerce)?
GST rates vary based on the product purchased, such as electronics, clothing, and accessories, which are generally charged at 18%, and food items are charged at 5% to 18% depending on the item.
E-commerce operators are required to collect TCS (Tax Collected at Source) at 1% on net taxable supplies.
What is GST 2.0?
GST 2.0 refers to the major reforms announced in September 2025 that simplified the tax structure into two main slabs (5% and 18%) by removing the 12% and 28% slabs, and introduced a new 40% slab for sin goods.
Which items became cheaper after GST 2.0?
Daily essentials dropped to 5%, agricultural equipment from 12% or 18% to 5%, healthcare services to 5% or exempt, and education services are now fully tax-exempt.
What is taxed at 40% GST?
The new 40% GST slab applies to:
- Luxury cars and premium bikes
- Tobacco products and cigarettes
- Aerated drinks and pan masala
- Yachts and private aircraft
- Other demerit and luxury goods
How does GST 2.0 benefit small businesses?
GST 2.0 benefits small businesses by simplifying tax rates, reducing compliance burden, and improving refund processing. It introduces a two-slab system, lowers taxes on essentials, and enhances digital tools for easier filing. These changes help MSMEs save costs, boost efficiency, and improve cash flow.
What is the new GST rate for life and health insurance premiums?
Effective September 22, 2025, the GST on premiums for individual life and health insurance policies has been reduced to 0%. This applies to policies like term insurance, endowment plans, ULIPs, and individual/family health insurance policies. The previous rate was 18%.