Worked Examples
Example 1: Restaurant Bill (Intra-state, GST Exclusive)
Scenario: Food bill of ₹1,000 before tax, 5% GST, same state
• Base Amount = ₹1,000
• GST Rate = 5% (restaurant service in same state)
• CGST = 5% ÷ 2 = 2.5%
• SGST = 5% ÷ 2 = 2.5%
Calculation:
GST Amount = ₹1,000 × 5% = ₹50
CGST = ₹25 | SGST = ₹25
Total Bill = ₹1,050
Example 2: Software Service (Inter-state, GST Exclusive)
Scenario: SaaS subscription ₹10,000, 18% GST, buyer in different state
• Base Amount = ₹10,000
• GST Rate = 18% (inter-state service)
• IGST = 18% (full rate, not split)
GST Amount = ₹10,000 × 18% = ₹1,800
IGST = ₹1,800
Total Invoice = ₹11,800
Example 3: Product Sale (GST Inclusive)
Scenario: Product priced at ₹5,900 (inclusive of 18% GST), intra-state
• Final Price (with GST) = ₹5,900
• GST Rate = 18%
Calculation:
GST Amount = ₹5,900 × 18 ÷ (100 + 18) = ₹5,900 × 18 ÷ 118 = ₹900
Base Price = ₹5,900 - ₹900 = ₹5,000
CGST = ₹450 | SGST = ₹450
Breakdown: ₹5,000 base + ₹900 GST = ₹5,900
Example 4: Gold Purchase (3% Special Rate)
Scenario: Gold worth ₹1,00,000, 3% GST, intra-state
• Base Amount = ₹1,00,000
• GST Rate = 3% (special rate for gold)
GST Amount = ₹1,00,000 × 3% = ₹3,000
CGST = ₹1,500 | SGST = ₹1,500
Total = ₹1,03,000
Common Mistakes to Avoid
Using wrong supply type
Intra-state transactions must show CGST+SGST separately on invoices. Inter-state transactions must show only IGST. Using the wrong structure can lead to GST filing errors and rejection of input tax credit by buyers.
Confusing inclusive vs exclusive GST
When a retailer says "₹1,180 with GST included", the base price is ₹1,000 and GST is ₹180 (at 18%). Do not calculate GST as ₹1,180 × 18% = ₹212.40 — that is wrong! Use the inclusive formula: ₹1,180 × 18 ÷ 118 = ₹180.
Applying wrong GST rate
GST rates depend on HSN/SAC codes and can have exceptions. A "service" is not automatically 18% — some services are 5%, others exempt. Restaurant food is 5%, but AC restaurants may have different rules. Always verify the correct rate for your specific product/service.
Not updating to GST 2.0 rates
Since 22 September 2025, the 12% and 28% rates are discontinued under GST 2.0 reforms. Items previously at 12% are now mostly at 5% or 18%. Items at 28% moved to 18% or 40%. Using old rates on invoices causes compliance issues.
Rounding errors in CGST/SGST split
When splitting GST equally into CGST and SGST, ensure both add up exactly to the total GST. For ₹1 GST at 18%, it is ₹0.50 CGST + ₹0.50 SGST, not ₹0.49 + ₹0.49. Many accounting software handle this, but manual calculations need care.
Forgetting GST on online transactions
Many assume online sales within India are "exports" or exempt — wrong! Selling to a customer in another Indian state is inter-state supply and requires IGST. Only international exports (outside India) are zero-rated.
Updated: October 2026 (reflects GST 2.0 rates effective 22 Sep 2025)
Source: Central Board of Indirect Taxes and Customs (CBIC) and Press Information Bureau (PIB) notifications
Note: GST rates and rules are subject to change. For compliance and filing, always refer to the official GST Portal (gst.gov.in) or consult a tax professional.
CGST & SGST (Intra-state)
When goods/services are supplied within the same state, GST is split equally between CGST and SGST.
IGST (Inter-state)
When goods/services are supplied between different states, IGST is applied instead of CGST+SGST.
Frequently Asked Questions
What is GST?
GST (Goods and Services Tax) is an indirect tax levied on the supply of goods and services in India. Implemented on 1 July 2017, it replaced multiple indirect taxes like VAT, service tax, excise duty, and entry tax, creating a unified tax structure across India.
What are the current GST rates in India?
Under GST 2.0 (effective 22 September 2025), the main GST rates are 5% and 18%. A 40% rate applies to specified goods (luxury items, tobacco products). Special rates include 0% (exempt goods like fresh food, education), 0.25% (rough diamonds), and 3% (gold, silver, precious stones). The previous 12% and 28% standard rates were discontinued in GST 2.0 reforms.
What is the difference between CGST, SGST, and IGST?
For intra-state supplies (within same state), GST is split equally between CGST (Central GST - goes to Central Government) and SGST (State GST - goes to State Government). For inter-state supplies (between different states), IGST (Integrated GST) is levied and collected by the Central Government. Example: 18% GST on intra-state = 9% CGST + 9% SGST. Same 18% on inter-state = 18% IGST.
Should I choose GST Exclusive or GST Inclusive?
GST Exclusive means GST is added to the base price (used when you know the price before tax). GST Inclusive means GST is already included in the final price (used when the selling price includes tax, and you want to extract the GST component). Retailers typically display inclusive prices to customers.
How do I calculate GST manually?
For GST Exclusive (adding GST): GST Amount = Base Price × GST Rate ÷ 100. Final Price = Base Price + GST Amount. For GST Inclusive (extracting GST): GST Amount = Final Price × GST Rate ÷ (100 + GST Rate). Base Price = Final Price - GST Amount. Example: ₹1,000 base + 18% GST = ₹1,180 final. Or ₹1,180 inclusive at 18% = ₹1,000 base + ₹180 GST.
When should I use IGST vs CGST+SGST?
Use IGST for all inter-state transactions (supplier and buyer in different states) and for imports. Use CGST+SGST for intra-state transactions (supplier and buyer in same state). On invoices, you cannot mix them - it's either CGST+SGST or IGST, never both together. The total tax rate remains the same regardless of which structure applies.
Are there any items with zero GST rate?
Yes, many essential items are exempt (0% GST): fresh fruits and vegetables, milk, eggs, bread, unpacked food grains, books and newspapers, education and healthcare services. Note that 'exempt' and '0% rated' are technically different under GST law, but both mean no tax is charged to the customer.
What GST rate applies to my product or service?
GST rates are determined by HSN code (for goods) or SAC code (for services). Essential items are typically 5%, most goods and services are 18%, and luxury/sin goods are 40%. Check the official GST rate schedule on the GST Council website or consult a tax professional for your specific product/service category, as rates can have exceptions and special provisions.