Glossary
What is GST?
One tax on every stage of a sale, where each business pays only on the value it adds.
Updated
In short
GST is India's tax on the supply of goods and services, charged at each stage with credit for tax paid on inputs. SimpleERP applies the right GST on every document from your tax rates and the place of supply.
GST, the Goods and Services Tax, is India's tax on the supply of goods and services, charged at each stage of the chain with credit for tax already paid on inputs, so each business pays tax only on the value it adds. Within a state it is split into CGST and SGST; between states it is IGST. Rates are set per HSN or SAC code by the GST Council.
GST: a worked example
Lakshmi Steel Furnitures buys MS sheet from Tamil Nadu Steels for ₹50,000 plus ₹9,000 GST, makes racks and sells them for ₹80,000 plus ₹14,400 GST. It pays the government only ₹5,400, the tax on the ₹30,000 of value it added, because the ₹9,000 it paid on the sheet is credited. Figures assume 18% on both. Rates change, so confirm the rate for your goods with your CA or the GST portal before you rely on it.
| Step | Value | GST at 18% |
|---|---|---|
| Bought MS sheet | ₹50,000 | ₹9,000 paid (input tax) |
| Sold racks | ₹80,000 | ₹14,400 collected (output tax) |
| Paid to government | ₹30,000 added | ₹5,400 net |
What are the GST rates after 22 September 2025?
From 22 September 2025 the GST Council moved to two main slabs, 5% and 18%, with a 40% rate for a short list of luxury and sin goods. The 12% and 28% slabs were largely withdrawn, and nil and special rates such as 3% on gold remain. Read what to update in your billing for the practical steps.
FAQ
Questions, answered
What are the types of GST?
Four: CGST and SGST, charged together on a supply within one state; UTGST, which replaces SGST in union territories without a legislature; and IGST, charged on supplies between states and on imports. A business also meets compensation cess on a few goods.
When must my business register for GST?
Generally when aggregate turnover crosses ₹40 lakh for goods or ₹20 lakh for services, with lower limits in some special category states. Inter-state sellers of goods and some e-commerce sellers must register whatever their turnover. Confirm your case with your CA.
How often do I file GST returns?
A regular business files GSTR-1 for sales and GSTR-3B for the tax summary, monthly or quarterly under the QRMP scheme if turnover is up to ₹5 crore, and an annual return, GSTR-9, when required. Composition dealers file differently.
Is GST charged on the price including discount?
GST is charged on the transaction value. A discount shown on the invoice at the time of sale is deducted before tax. A discount given later reduces the value only if it was agreed in advance and is linked to specific invoices through a credit note.
Related
Keep reading
GST billing
Tax invoices with CGST, SGST or IGST by place of supply, HSN on every line and a UPI QR on the print.
Read moreInput tax credit (ITC)
The GST paid on purchases that a business sets off against the GST it collects on sales.
Read moreGST billing guide
Everything a small business needs for GST billing, in order: registration, invoices, numbering, notes, registers, returns and a month-end checklist.
Read more
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