Key points
- Adding GST: total = price × (1 + rate). Removing GST: base = total ÷ (1 + rate).
- After the GST 2.0 reform of September 2025, most goods and services fall in the 5% or 18% slabs, with 40% for demerit goods.
- Within a state, GST is split equally into CGST and SGST; between states, it is charged as IGST.
- Businesses recover the GST they pay on purchases through input tax credit.
Adding and removing GST
To add GST to a price: GST = price × rate, and total = price + GST. A ₹10,000 item at 18%: GST ₹1,800, total ₹11,800.
To remove GST from an inclusive price: base = total ÷ (1 + rate). From ₹11,800 at 18%: 11,800 ÷ 1.18 = ₹10,000, so GST was ₹1,800. A common mistake is taking 18% of ₹11,800 (₹2,124), which overstates the tax.
GST rate slabs
| Rate | Typically applies to |
|---|---|
| 0% (nil / exempt) | Fresh food, milk, many basic necessities, education and healthcare services |
| 5% | Everyday essentials, many packaged foods and some services |
| 18% | The standard rate: most goods and most services |
| 40% | Demerit and luxury goods such as tobacco and aerated sugary drinks |
The GST 2.0 changes, effective 22 September 2025, moved most items out of the older 12% and 28% slabs into 5% or 18%, though a few items still carry other rates. The exact rate depends on the item’s HSN or SAC code — check the CBIC rate finder for a specific product or service.
CGST, SGST and IGST
When the supplier and the place of supply are in the same state, the GST is split equally between the centre (CGST) and the state (SGST, or UTGST in union territories): 18% becomes 9% + 9%. When they are in different states, the whole amount is charged as integrated GST (IGST). The total tax is the same either way; only who collects it differs.
Input tax credit: why GST is a tax on value added
A registered business pays GST on its purchases and collects GST on its sales. It pays the government only the difference, claiming the tax on purchases as input tax credit. If a trader buys goods for ₹10,000 + ₹1,800 GST and sells them for ₹15,000 + ₹2,700 GST, it deposits only ₹900 — the GST on the ₹5,000 of value it added. The final consumer bears the full ₹2,700.
Who must register
- Suppliers of goods with turnover above ₹40 lakh a year (₹20 lakh in special-category states).
- Service providers with turnover above ₹20 lakh (₹10 lakh in special-category states).
- Anyone making interstate supplies of goods or selling through e-commerce operators, in most cases regardless of turnover.
- Small businesses can opt for the composition scheme, paying tax at a low flat rate on turnover without input tax credit.
Reading a GST invoice
- The supplier’s and, for business purchases, the buyer’s GSTIN (15-character GST number).
- An HSN code for goods or SAC code for services, which determines the rate.
- The taxable value, the GST rate, and the tax split into CGST + SGST or shown as IGST.
- The place of supply, which decides whether CGST + SGST or IGST applies.
- For businesses, only a proper tax invoice lets you claim input tax credit.
GST on a discounted price
GST is charged on the transaction value after a discount shown on the invoice. An item listed at ₹10,000 with a 10% discount is taxed on ₹9,000: at 18%, GST is ₹1,620 and the total ₹10,620. The discount calculator applies GST after discounts.
Frequently asked questions
How do I calculate GST at 18% on ₹1,000?
Multiply by 0.18: GST is ₹180 and the total ₹1,180. Within a state, that is ₹90 CGST plus ₹90 SGST.
How do I find the price before GST?
Divide the GST-inclusive price by 1 plus the rate. For ₹1,180 at 18%, 1,180 ÷ 1.18 = ₹1,000.
Is GST charged on salary?
No. Salary paid by an employer to an employee is outside GST.