Goods and Services Tax replaced most indirect taxes in India in July 2017. For a small business, three questions matter: do I need to register, what rate applies to what I sell, and what do I have to file. This guide answers all three in plain language.
GST rules change through notifications and GST Council decisions. Treat this as an orientation and confirm the details for your situation with a tax professional or on the official GST portal.
Do you need to register?
Registration is required when your aggregate turnover in a financial year crosses the threshold for your state and type of supply:
| Supplier type | Most states | Special category states |
|---|---|---|
| Only goods | ₹40 lakh | ₹20 lakh |
| Services, or goods and services | ₹20 lakh | ₹10 lakh |
Aggregate turnover counts all taxable, exempt and export supplies made under the same PAN across India.
Some businesses must register whatever their turnover, including anyone making inter-state taxable supplies of goods, most sellers supplying goods through e-commerce platforms, persons liable to pay tax under reverse charge and casual taxable persons. There are exemptions for small service providers selling inter-state, so check your case.
Voluntary registration is allowed and can make sense if your customers are businesses that want input tax credit.
The GST slabs after GST 2.0
From 22 September 2025, following the 56th GST Council meeting, the rate structure was simplified. The old 12% and 28% slabs were removed for most items. The main rates now are:
| Rate | Used for |
|---|---|
| 0% (nil or exempt) | Many unprocessed foods and essentials |
| 5% | Merit rate for everyday goods and some services |
| 18% | Standard rate for most goods and services |
| 40% | Special rate for specified luxury and sin goods |
A few special rates continue, such as 3% on gold and silver and 0.25% on rough diamonds. The exact rate for your product depends on its HSN code (or SAC for services), so always look up the specific code.
Our GST calculator works with all of these rates, both for adding GST to a price and for finding the GST already inside an inclusive price.
CGST, SGST and IGST
- Within your state (intra-state supply): the tax is split equally into Central GST and State GST. An 18% item is charged 9% CGST plus 9% SGST.
- To another state (inter-state supply): the whole tax is charged as Integrated GST. The same item is charged 18% IGST.
The place of supply decides which applies. For goods it is usually where the goods are delivered.
The composition scheme for small businesses
If your turnover is up to ₹1.5 crore (₹75 lakh in some special category states), you can opt for the composition scheme. Small service providers can use a separate composition option up to ₹50 lakh.
| Business | Composition tax on turnover |
|---|---|
| Manufacturers and traders | 1% |
| Restaurants not serving alcohol | 5% |
| Service providers (special option) | 6% |
The trade-offs: you cannot charge GST to customers, you cannot claim input tax credit, you issue a bill of supply instead of a tax invoice, and you generally cannot make inter-state outward supplies. In return, compliance is much lighter: a quarterly payment statement (CMP-08) and one annual return (GSTR-4).
Input tax credit in one paragraph
When you buy goods or services for your business, you pay GST to your supplier. A regular GST-registered business can subtract that tax (the input tax credit) from the GST it collects on sales and pay only the difference. Credit is allowed only when your supplier has uploaded the invoice in their return and it appears in your GSTR-2B, so buy from suppliers who file on time.
Returns a regular small business files
| Return | What it is | Usual due date |
|---|---|---|
| GSTR-1 | Details of your sales | 11th of next month (monthly filers) |
| GSTR-3B | Summary return and tax payment | 20th of next month (monthly filers) |
| GSTR-9 | Annual return (optional below ₹2 crore turnover) | 31 December after the year |
Under the QRMP scheme, businesses with turnover up to ₹5 crore can file GSTR-1 and GSTR-3B quarterly while paying tax monthly. Our due-date calendar lists the upcoming dates automatically.
E-invoicing and e-way bills
- E-invoicing is mandatory for business-to-business invoices when your aggregate turnover in any year since 2017-18 has exceeded ₹5 crore.
- An e-way bill is generally needed to move goods worth more than ₹50,000 in a single consignment, with some state-specific variations and exemptions.
A simple GST checklist
- Check whether your turnover or activity requires registration.
- Decide between regular and composition, based on who your customers are.
- Find the HSN or SAC code and rate for each product or service.
- Issue proper invoices from day one. See our GST invoice guide.
- Keep purchase invoices and check them against GSTR-2B every month.
- File returns on time; late fees and interest add up quickly.
Common questions
Is GST registration free?
Yes. Registration on the official GST portal has no government fee. Consultants may charge for preparing the application.
What happened to the 12% and 28% GST slabs?
Under the GST 2.0 changes effective 22 September 2025, most items in the 12% slab moved to 5% and most items in the 28% slab moved to 18%. A short list of luxury and sin goods moved to a special 40% rate.
Can a composition dealer sell to other states?
Generally no. Composition dealers cannot make inter-state outward supplies of goods. Check the current rules before opting in if you plan to sell outside your state.
This guide is general information to help you understand the topic. It is not legal, tax or financial advice. Rules and rates change; confirm details for your situation with a qualified professional or the official government portal. Read our editorial policy.