GST in India Explained: Slabs, Credit & Calculation
The Goods and Services Tax (GST) replaced a tangle of older indirect taxes — VAT, service tax, excise — with a single, unified tax on most goods and services in India. Whether you are a shopper trying to understand a restaurant bill or a small business owner raising your first invoice, this guide explains how GST is structured, how to calculate it both ways, and how input tax credit can save businesses money.
The GST slabs
GST is charged at different rates depending on the type of good or service. The main slabs are:
| Rate | Typical items |
|---|---|
| 0% (exempt) | Fresh produce, milk, bread, education, healthcare |
| 5% | Packaged food essentials, economy transport, small restaurants |
| 12% | Processed foods, business-class air travel, some apparel |
| 18% | Most goods and services — electronics, soaps, restaurants in AC malls, telecom |
| 28% | Luxury and "sin" goods — cars, tobacco, aerated drinks (often plus cess) |
The 18% slab covers the largest share of everyday goods and services, which is why it is the most useful default to know.
CGST, SGST and IGST
The GST you pay is split between the central and state governments:
- CGST + SGST apply to sales within the same state. An 18% GST is split as 9% CGST + 9% SGST.
- IGST applies to sales between states (and imports) — the full 18% is charged as one Integrated GST, later shared between centre and the destination state.
For you as a buyer the total is the same; the split only determines which government gets which share.
How to add GST to a price
If a product's base price is ₹1,000 and GST is 18%:
GST amount = ₹1,000 × 18% = ₹180. Final price = ₹1,000 + ₹180 = ₹1,180.
How to remove GST (reverse calculation)
Often you see the final price and want to know the base price and tax — for example, to claim input credit or to understand an inclusive bill. The formula is:
Base price = Final price × 100 ÷ (100 + rate). For a ₹1,180 inclusive price at 18%: ₹1,180 × 100 ÷ 118 = ₹1,000 base + ₹180 GST.
Both add and remove modes are built into our GST Calculator — just type the amount and pick the rate.
🧾 Add or remove GST instantly →
Input Tax Credit (ITC) — the heart of GST
The feature that makes GST efficient is input tax credit. A registered business pays GST on its purchases (inputs) and collects GST on its sales (outputs). It only deposits the difference with the government:
GST payable = GST collected on sales − GST paid on purchases. This prevents "tax on tax" (cascading), so tax is effectively charged only on the value each business adds.
Example: a furniture maker buys wood for ₹10,000 + ₹1,800 GST, and sells a table for ₹20,000 + ₹3,600 GST. It claims the ₹1,800 input credit and deposits only ₹3,600 − ₹1,800 = ₹1,800.
Who needs to register for GST?
- Goods: Registration is generally mandatory once annual turnover crosses ₹40 lakh (₹20 lakh in some special-category states).
- Services: The threshold is generally ₹20 lakh (₹10 lakh in special-category states).
- Always required for inter-state sellers, e-commerce sellers, and those under reverse charge — regardless of turnover.
- Composition scheme: Small businesses below ₹1.5 crore can opt for a simpler flat-rate scheme with less paperwork (but cannot claim input credit).
Key takeaways
- GST has slabs of 0%, 5%, 12%, 18% and 28% — 18% covers most everyday items.
- Within a state: CGST + SGST; across states: IGST. The total rate is the same for buyers.
- Add GST: price × (1 + rate). Remove GST: price × 100 ÷ (100 + rate).
- Input tax credit means businesses pay GST only on the value they add.