For a new small business owner in India, GST can feel like an entirely separate system to learn on top of running the actual business — here's the practical version of what matters.
Do you need to register?
GST registration becomes mandatory once your annual turnover crosses ₹40 lakh for goods (₹20 lakh in some special category states) or ₹20 lakh for services (₹10 lakh in special category states). Below these thresholds, registration is optional — though some clients or B2B customers may require you to be GST-registered regardless of your turnover, to claim input tax credit on their end.
Understanding the four main rate slabs
GST in India is levied at 5%, 12%, 18%, and 28%, with the applicable rate depending on the category of goods or services you provide — check the official GST rate schedule for your specific category rather than assuming a rate, since misclassifying your rate is a common compliance issue.
CGST, SGST, and IGST — why invoices split the tax
For sales within the same state, GST splits equally between CGST (central) and SGST (state) — an 18% sale shows as 9% + 9% on the invoice. For sales to a customer in a different state, the full amount is charged as IGST instead, to a single head. Getting this split wrong on invoices is a common early mistake for new businesses.
The Composition Scheme — a simpler alternative for very small businesses
If your turnover is below ₹1.5 crore (₹75 lakh for some states), you may be eligible for the GST Composition Scheme, which lets you pay a flat, lower tax rate on turnover instead of standard GST rates, with much simpler quarterly filing — but you can't charge GST to customers or claim input tax credit under this scheme, which matters if your customers are businesses expecting to claim credit on your invoices.
A practical habit that prevents most problems
Keep GST collected in a separate account from day one rather than mixing it with business revenue — it's the government's money passing through your business, and treating it as available cash is the single most common cause of GST payment shortfalls at filing time.