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Learn how GST works, understand IGST, CGST, and SGST differences, and use our calculator to compute taxes on your transactions.
Everything you need to know
If you're doing business in India, GST (Goods and Services Tax) affects every transaction. But the three types of GST — IGST, CGST, and SGST — confuse most people.
The difference matters. Apply the wrong GST type, and you could face penalties. Get it right, and you optimize your compliance and costs.
In this guide, we'll explain how GST works, clarify the three types, show you how to calculate each, and help you determine which applies to your transaction.
GST is India's most important indirect tax. Understanding it helps you:
Most small businesses get GST wrong, costing them money or creating compliance issues. Those who understand it optimize both compliance and profitability.
GST (Goods and Services Tax) is India's unified indirect tax on goods and services, effective since July 1, 2017.
Key Features:
Tax Structure:
Total tax rate: 5%, 12%, 18%, or 28% (depending on product/service)
What it is: Tax collected by Central Government (Ministry of Finance)
Applies to:
Rate structure:
Example: Karnataka-based company sells to another Karnataka company
Who pays: Ultimately the end consumer; businesses collect and deposit
What it is: Tax collected by State Government (State Excise Department)
Applies to:
Rate structure:
Example: Maharashtra-based company sells to another Maharashtra company
Who pays: Ultimately the end consumer; businesses collect and deposit
What it is: Tax on interstate and international transactions (combined central + state)
Applies to:
Rate structure:
Example: Karnataka company sells to Delhi company
Who pays: Ultimately the end consumer; businesses collect and deposit
| Aspect | CGST | SGST | IGST |
|---|---|---|---|
| Applies to | Intrastate | Intrastate | Interstate/International |
| Collected by | Central Government | State Government | Central Government |
| Rate | 50% of total rate | 50% of total rate | 100% of total rate |
| Example | Karnataka to Karnataka | Maharashtra to Maharashtra | Karnataka to Delhi |
| Total Tax | CGST + SGST | CGST + SGST | IGST only |
Scenario: Bangalore company sells goods to another Bangalore company
Transaction Details:
Calculation:
CGST = Goods value × (18% ÷ 2) = ₹10,000 × 9% = ₹900
SGST = Goods value × (18% ÷ 2) = ₹10,000 × 9% = ₹900
Total GST = ₹900 + ₹900 = ₹1,800
Final Invoice Amount = ₹10,000 + ₹1,800 = ₹11,800
Breakdown:
Scenario: Bangalore company sells goods to a Delhi company
Transaction Details:
Calculation:
IGST = Goods value × 18% = ₹10,000 × 18% = ₹1,800
Final Invoice Amount = ₹10,000 + ₹1,800 = ₹11,800
Breakdown:
Scenario: Bangalore IT consultant provides services to Mumbai company
This is interstate (different states) so IGST applies.
Transaction Details:
Calculation:
IGST = ₹50,000 × 18% = ₹9,000
Final Invoice Amount = ₹50,000 + ₹9,000 = ₹59,000
Breakdown:
Crucial concept: GST system allows input tax credit.
If a registered business pays GST on purchases, they can deduct it from GST owed on sales.
Example:
Impact: Only the "value added" is taxed, not the entire value chain.
This is why businesses must maintain proper invoices and claim input credits.
5% GST: Basic goods
12% GST: Common goods and services
18% GST: Most goods and services
28% GST: Luxury items
Decision Tree:
Question 1: Are supplier and recipient in the same state?
Question 2: Is it an intrastate supply?
Question 3: Is it an import?
Wrong: Applying 9% CGST + 9% SGST to interstate transaction Right: Apply 18% IGST only
Wrong: Thinking services only apply CGST + SGST Right: Services are also subject to IGST if interstate
Wrong: Not deducting GST paid on purchases Right: Claim ITC to reduce GST liability
Wrong: Using CGST + SGST + IGST on same transaction Right: Either (CGST + SGST) OR IGST, never both
Wrong: Applying 18% GST to a 5% product Right: Check classification and apply correct rate
Q: Can unregistered businesses charge GST? A: No. Only GST-registered businesses can charge GST and claim ITC. If unregistered, you're outside GST system.
Q: What's the GST registration threshold? A: ₹40 lakhs annual turnover for goods, ₹20 lakhs for services (lower in certain states). Voluntary registration possible below threshold.
Q: Can I claim input credit on all purchases? A: No. Only on GST-paid supplies used for taxable supplies. Personal/exempt supplies don't qualify.
Q: How often do I file GST returns? A: Monthly (by 20th of next month) or quarterly. Depends on your registration type and turnover.
Q: What if I apply wrong GST type? A: You may face penalties, notice from GST authorities, and interest on unpaid tax. Correct immediately.
Q: How do I know if a supply is interstate or intrastate? A: Place of supply rules: For goods, it's the delivery location. For services, it's typically the recipient's location.
Q: Can GST rate change? A: Yes. GST Council can change rates. Check official GST rates before quoting to customers.
Q: What's HSN and SAC? A: HSN (for goods) and SAC (for services) are classification codes determining the GST rate. You must include them on invoices if applicable.
Q: Do I need separate bank accounts for CGST/SGST/IGST? A: No, not legally required. But maintaining clear records is essential for audits and returns.
Q: What if buyer is in different country? A: IGST applies plus potential additional import duties. Consult a customs broker for imports.
Understanding IGST, CGST, and SGST is essential for any GST-registered business in India.
Use our sales tax calculator to:
Get GST calculations right from the start. It saves compliance headaches and tax penalties.
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