How vat / sales tax works in India
Indian GST is a dual levy — CGST plus SGST inside a state, IGST across states — with September 2025's GST 2.0 reform collapsing the old 12% and 28% slabs into 5%, 18%, and a 40% demerit rate.
Essentials, food, and mass consumption sit at 5% or nil, most goods and services at 18%, and luxury cars, tobacco, aerated drinks, and gaming at 40%, with gold at a special 3%.
Registration starts at INR 40 lakh for goods and INR 20 lakh for services in most states, with monthly GSTR-1 and GSTR-3B filings and e-invoicing above the turnover limit.
Tax rates at a glance
- GST slabs
- 5% / 18%
- Sin goods rate
- 40%
- Precious metals
- 3%
- Nil-rated essentials
- 0%
- Registration threshold
- INR 40 lakh
- Services threshold
- INR 20 lakh
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
E-commerce sellersSaaS foundersFreelancersExpatsCross-border traders
Watch out for
- Pre-September 2025 rate charts are now wrong: the 12% and 28% slabs are gone, so ERP mappings, HSN tables, and SAC codes need the post-reform schedule.
- Place of supply decides CGST-plus-SGST versus IGST, and getting the split wrong misdirects revenue between governments and breaks input-credit matching.
- Nil-rated insurance and lifesaving drugs look like exemptions but need precise classification, while blocked credits on exempt supplies still require reversals.
- E-invoicing, e-way bills, and GSTR-2B matching make GST a systems tax: invoice discipline matters more than the slab itself.
Frequently asked questions
What are India's GST rates after the 2025 reform?
From September 22, 2025 the main slabs are 5% and 18%, with 40% for luxury and sin goods, 3% for precious metals, and nil-rating for essentials such as individual insurance and lifesaving drugs.
When must an Indian business register for GST?
Past INR 40 lakh of goods turnover or INR 20 lakh of services turnover in most states, with lower limits in special-category states and separate rules for e-commerce operators.
How does CGST, SGST, and IGST work?
Intra-state supplies split GST into central and state halves, while inter-state supplies charge IGST. The mechanism decides which government receives the tax and how credits flow.