GST in India: Tax Slabs, Registration, and Compliance Overview
GST has matured into a highly automated indirect tax system, with the Invoice Management System and matching-based Input Tax Credit closing most of the gaps that earlier allowed manual manipulation. For any business — startup, established company, or professional — the practical questions remain the same: which slab applies, when registration is mandatory, and what keeps a GSTIN in good standing.
Current Tax Slab Structure
Tax slabs have been rationalised into a simpler four-tier structure alongside a couple of special rates.
|
Slab |
Category |
Examples |
|---|---|---|
|
0% (Nil) |
Essentials |
Fresh vegetables, unbranded food, life-saving drugs |
|
5% |
Merit rate |
Household FMCG, namkeens, budget footwear |
|
18% |
Standard rate |
Electronics, small cars, telecom services, professional consulting |
|
40% |
Luxury and sin goods |
Luxury cars, tobacco, aerated sugary drinks, online money gaming |
Special rates of 3% on gold and jewellery and 0.25% on rough diamonds continue to apply outside this structure.
Registration Thresholds
Goods suppliers must register once annual aggregate turnover exceeds ₹40 lakh (₹20 lakh in special category states), while service providers cross the threshold at ₹20 lakh (₹10 lakh in special category states). Interstate sellers of goods must register regardless of turnover; this requirement does not extend to interstate service providers in the same blanket manner.
Returns and Filing Discipline
Monthly filers with turnover above ₹5 crore file GSTR-1 by the 11th and GSTR-3B by the 20th of the following month. Businesses under the QRMP scheme, available up to ₹5 crore turnover, file GSTR-1 quarterly by the 13th of the month following the quarter and GSTR-3B by the 22nd or 24th depending on the state, with an optional monthly invoice upload facility available in between.
A hard cutoff now applies to historical filings: returns more than three years past their original due date can no longer be filed at all, making stale non-filers permanently locked out of correcting old periods.
Input Tax Credit and Reconciliation
ITC is only available where the corresponding invoice appears in GSTR-2B, meaning it depends entirely on the supplier having filed their own GSTR-1. Rule 86B additionally requires larger businesses, with monthly turnover above ₹50 lakh, to discharge at least 1% of their tax liability in cash rather than through ITC alone. This makes tracking a supplier's filing behaviour — informally, their compliance score — a practical necessity rather than an optional check.
E-Invoicing and E-Way Bills
E-invoicing is mandatory for B2B transactions once turnover in any prior financial year exceeds ₹5 crore, with real-time reporting to the Invoice Registration Portal required within 30 days of the invoice date for businesses above ₹10 crore turnover. E-way bills carry a 180-day validity window from the invoice date, beyond which a transit document cannot be generated for that invoice.
Key Terms
An HSN code classifies goods for tax purposes, and using an incorrect code can misstate tax liability. Under the Reverse Charge Mechanism, the buyer — rather than the seller — pays tax directly to the government in specified cases such as legal services or goods transport. A Letter of Undertaking allows exporters to supply outside India without paying IGST upfront. The Composition Scheme lets small traders with turnover below ₹1.5 crore pay a flat rate, typically 1%, without detailed ITC record-keeping.
Penalties and Scrutiny
Authorities routinely cross-check GSTR-1 against GSTR-3B for sales mismatches, GSTR-3B against GSTR-2B for excess ITC claims, and GST returns against income tax filings for turnover discrepancies. Late fees run at ₹50 per day (₹20 for NIL returns), generally capped per return, with interest at 18% per annum accruing on any delayed tax payment.
Frequently Asked Questions
What happens if a GST return is more than three years overdue? It can no longer be filed; the period is permanently locked from correction.
Who is required to generate e-invoices? Businesses with turnover exceeding ₹5 crore in any prior financial year, for B2B transactions.
What does Rule 86B require of larger taxpayers? Businesses with monthly turnover above ₹50 lakh must pay at least 1% of their tax liability in cash rather than fully through ITC.
How is Input Tax Credit verified? Against GSTR-2B, which only reflects invoices where the supplier has filed its own GSTR-1.
