GST (Goods and Services Tax) replaced 17 central and state taxes in 2017 and remains India's primary indirect tax. For small businesses, the key questions are: when do I need to register, what do I file and when, and how do I claim input tax credit without a full-time accountant? This guide answers all three.
Registration Threshold — Do You Need to Register?
| Business Type | Annual Turnover Threshold |
|---|---|
| Goods (most states) | ₹40 lakh/year |
| Services | ₹20 lakh/year |
| Goods (special category states: NE, Uttarakhand, etc.) | ₹20 lakh/year |
| E-commerce sellers (via Amazon, Flipkart etc.) | Mandatory regardless of turnover |
| Inter-state supply (selling to another state) | Mandatory regardless of turnover |
| Exporters | Mandatory (but exports are zero-rated) |
GST Rates at a Glance
| Rate | What It Covers |
|---|---|
| 0% | Essential goods (fresh food, milk, eggs, newspapers, books) |
| 5% | Packaged food, tea/coffee, medicines, transport services |
| 12% | Processed food, computers, business-class travel |
| 18% | Most services, electronics, restaurant (AC), IT services, software |
| 28% | Luxury goods, cars (above 4m), tobacco, aerated drinks |
Filing Calendar — What You Must File and When
| Return | What It Covers | Due Date | Who Files |
|---|---|---|---|
| GSTR-1 | Outward supplies (sales invoices) | 11th of next month (monthly) / Quarterly | All registered taxpayers |
| GSTR-3B | Summary + tax payment | 20th of next month | All registered taxpayers |
| GSTR-9 | Annual return | 31st December after FY end | Turnover above ₹2 crore |
| CMP-08 | Composition scheme quarterly payment | 18th of month after quarter | Composition scheme taxpayers only |
The Composition Scheme — Should You Opt In?
The Composition Scheme lets small businesses pay GST at a flat rate (1–6% of turnover) instead of the full 18%/12% — with minimal compliance. You only file quarterly returns instead of monthly. Eligibility: turnover below ₹1.5 crore/year for goods, ₹50 lakh for services. The trade-off: you cannot claim ITC and cannot collect GST from customers (your invoices show no GST). Best for: small retailers, restaurants under ₹1.5 crore turnover, and service providers under ₹50 lakh with mostly B2C sales.
Input Tax Credit (ITC) — How to Claim What You're Owed
ITC lets you reduce your GST liability by the GST you've already paid on purchases. Example: you paid ₹18,000 GST on a laptop for business use → you can claim this against the GST you collect from clients. Rules for claiming ITC: the supplier must have filed their GSTR-1, the invoice must match in GSTR-2B (auto-populated), and you must use the purchase for business (not personal use). Maintain organised purchase invoices — ITC claims are reconciled during assessments.
Use Zoho Books or ClearTax for GST filing — don't do it manually
Zoho Books (₹399/month) auto-generates GSTR-1 from your invoices and files directly to the GST portal. ClearTax (₹2,999–₹5,999/year) provides similar functionality with CA support. Manual filing is error-prone and risks ITC mismatches. The software cost is deductible as a business expense and saves 4–6 hours of compliance work per month.
Frequently Asked Questions
Q: What is the penalty for late GST filing?
A: ₹50 per day (₹25 CGST + ₹25 SGST) for GSTR-3B late filing, capped at ₹5,000. For NIL returns (no sales), the penalty is ₹20/day. Interest at 18% per annum applies on unpaid tax from the due date. Late filing also locks you out of claiming ITC for that period — which is often a bigger financial impact than the penalty itself.
Q: Do I need to charge GST to international clients?
A: Exports of services are "zero-rated" under GST — you don't charge GST to international clients but can still claim ITC on your purchases. You must file LUT (Letter of Undertaking) annually on the GST portal to supply services without payment of tax. This is free and takes 15 minutes online.