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What is GST (goods and services tax)?

When goods and services tax was introduce to India it changed the way taxes worked. But what is GST? We'll take a closer look.

People in an office discussing what GST is

When goods and services tax was introduce to India it changed the way taxes worked. But what is GST? We’ll take a closer look.

What is GST?

GST is a tax added to the majority of products and services that are sold for domestic consumption. It was first introduced on the 1st July 2017.

As an individual, you pay GST on most purchases, whether it’s a cup of coffee or a car. As a business or a freelancer, you also pay GST when you purchase supplies or services from other businesses (B2B), but you can also claim GST from your clients.

How does GST work?

The rate ranges from 0-28 percent, depending on what you’re selling. Essential items, such as health services are 0 percent, while luxury goods and certain services have higher rates.

GST in India is categorised into three types:

  1. Central goods and services tax (CGST): This is the tax collected by the central government on intra-state sales (within the same state).
  2. State goods and services tax (SGST): This is the tax collected by the state government on intra-state sales.
  3. Integrated goods and services Tax (IGST): This tax is collected by the central government for inter-state sales (between two states).

Pro-tip: Manage GST with invoice software

With invoice software, you can easily add tax to your invoices. Just add your products and services to the invoice and choose the 10% tax rate. The invoice software will work out the total tax for you and clearly display it on your invoice.

Best of all—it’s completely free to use.

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What are the pros?

  • Simplification of taxes: GST replaces a number of indirect taxes with one single tax, significantly simplifying the tax system.
  • Removal of cascading effect: The credit mechanism under GST removes the cascading effect of taxes, so called tax on tax, making goods and services more affordable.
  • Boost to the economy: By streamlining the tax structure, GST has the potential to attract more investments and boost the economy.
  • Greater transparency: GST brings a higher level of transparency to the taxation process, making it easier for consumers to understand the taxes they pay.

Do I have to register for GST?

Whether you have to register, depends on your turnover.

If you work in the manufacturing sector, you have to register if you have turnover above Rs. 40 lakh

If you work in the service sector, you have to register if you have a turnover above Rs. 20 lakh. For some sectors, the limit is Rs. 10 lakh. If you’re in doubt, you should speak to a lawyer or a tax professional.

A young photographer making an invoice with the free invoicing software Conta

How do I send a tax invoice?

If you’re registered for GST, you have to include tax on your invoices. With the free invoice software from Conta, you can send as many invoices as you need! Just add your details, your client and the products and services you’ve sold—we’ll remind you about tax rates, if you forget.

You’ll also get a reminder if your client hasn’t paid by the due date, so you can follow up overdue invoices and get paid for your work. Join 80 000+ businesses, freelancers and contractors using Conta.

Send invoices for free