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
Basics of GST with Examples
 Author - Rohit Pithisaria  Last Updated - October 7, 2020

Confused in complicated laws? Take our GST consultation services to get your issues

solved from GST experts. Click here to know more. (https://taxadda.com/gst-
Rohit Pithisaria
 consultation/)
I am a Indian Tax Expert based in
Jaipur (Rajasthan). Started TaxAdda in
2011 as a tax blog and now providing all
types services related to GST and
Income Tax to the client all over India.
Introduction You can connect with us 82396-85690.

Goods and Service Tax (GST) is applicable in India from 1st July 2017.

Before 1st July 2017, service tax applies to services and vat, excise duty, etc. apply to goods.
Table of Contents 
After 1st July 2017, GST applies to trading and manufacturing of goods as well as on providing
services. 1. Introduction

Businesses who are liable to

GST is not applicable to alcohol, crude petroleum, motor spirit, diesel, aviation turbine fuel and 2.
collect GST
natural gas. VAT, CST and excise duty is still applicable to them. (https://taxadda.com/gst-
3.
return-service)
Services on which GST is not
applicable
Here is a list of taxes which are applicable before GST and is no longer applicable.
What are 3 types of GST –
4.
Central Indirect Taxes – Central Excise Duty, Additional Excise Duties, Service Tax, Additional CGST, SGST AND IGST?
Customs Duty (CVD), Special Additional Customs Duty, Central Surcharges and Cess Inter-state sales or Intra-
5.
state sales
State Indirect Taxes – VAT/Sales Tax, Entertainment Tax, Central Sales Tax, Octroi and Entry Tax, 6. How to calculate GST?
Purchase Tax, Luxury Tax, Tax on Lottery, State Cesses and Surcharges Calculation of GST Amount
7.
payable to Government
Basic customs duty and anti-dumping duty is also applicable in addition to GST in case of
8. GST Rates
import of goods.
9. Advantages/Benefits of GST

Businesses Who Are Liable To Collect GST

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The persons who are required to get compulsorily register in GST (https://taxadda.com/gst-
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customers and pay to the government.

Name
A person can also register voluntarily under GST and he is also required to collect GST after
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registration. All provisions of the GST Act is also applicable to him.

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Services On Which GST Is Not Applicable

GST is not applicable to certain services such as

Salary and wages

Electricity

Interest

Government Fees (such as MCA fees, land registration fees etc.)

What Are 3 Types Of GST – CGST, SGST AND IGST?

The GST system in India contains three types of GST. They are

Central GST (CGST) – levied by central government

State GST (SGST) – levied by a state government

Integrated GST (IGST) – levied by the Central government on an inter-state supply of

goods and services

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3/28/24, 12:19 PM Basics of GST with Examples - TaxAdda

On a sale of goods/service either IGST is to be charged or SGST & CGST both to be charged. If
the business is in union territory, then UTGST will apply in place of SGST. The difference is only in
name; the concept is the same.

Applicability of different types of tax



Transaction Type Type of GST Example

 Applicable

 Intra-state (i.e. sale CGST + SGST A dealer in Delhi makes a sale to another dealer in Delhi.
within the same state) GST rate is 18%, so CGST of 9% and SGST of 9% will be
 applicable.

Inter-state (i.e sale IGST A dealer in Mumbai makes a sale to a dealer in Delhi. GST
outside state) rate is 5%, so 5% IGST will be applicable.

(https://taxadda.com/gst-
return-service)

Inter-State Sales Or Intra-State Sales

When the location of the supplier and place of supply is the same state/union territory, then it is
considered as Intra-state sales, if they are different then it is considered as inter-state sales.

Now the question arises: What is a place of supply?

In general, a place of supply in case of goods is the location of goods at the time at which the
movement of goods terminates for delivery to the recipient. For example – A person in Gujarat
sells the goods to a person in Rajasthan and therefore handover to the transport company to
deliver in Rajasthan. Therefore, the place of supply is Rajasthan and it is an inter-state sales.

Place of supply in case of services will be the location of the recipient if he is a registered
person. If the recipient is not a registered person, then the place of supply will be the location of
the recipient where the address on record exists otherwise it will be the location of the supplier.

How To Calculate GST?

GST can be calculated simply by multiplying the Taxable amount by GST rate. If CGST &
SGST/UTGST is to be applied then CGST and SGST both amounts are half of the total GST
amount.

GST = Taxable Amount x GST Rate

If you have the amount which is already including the GST then you can calculate the GST
excluding amount by below formula

GST excluding amount = GST including amount/(1+ GST rate/100)

For example, GST including amount is Rs. 525 and GST rate is 5%.

GST excluding amount = 525/(1+5/100) = 525/1.05 = 500

GST is calculated on the transaction amount and not on the MRP.

Calculation Of GST Amount Payable To Government

A registered person needs to pay the difference of GST on sales and GST on purchases made in
a month. The purchase may be of goods, services or capital goods.

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3/28/24, 12:19 PM Basics of GST with Examples - TaxAdda

Capital goods are those goods which you had NOT purchased for the purpose of reselling. For
example – Furniture in your shop, machine for production etc.

For example, A person made intra-state sales of Rs. 1 lakh in January and collected CGST of Rs.
2,500 and SGST of Rs. 2,500 at the rate of 5%. In the same month, he had made purchases of Rs.

80,000 and paid CGST and SGST of Rs. 2,000 each at a rate of 5%. He had also paid a bill of


internet of Rs. 1,000 plus GST of Rs. 180.

 Rs. 4,180 is allowed as a deduction from the Gross tax payable of Rs. 5,000. And therefore a net
of Rs. 820 is payable to the government.

Deduction of GST paid on the purchase of goods, services or capital goods is called input tax
credit. There are certain limitations and restrictions on taking the input tax credit. You can read
more about it from here – Input Tax Credit Under GST (https://taxadda.com/gst-input-tax-
credit/)

GST Rates
GST rates are as under

0% (necessity items like milk, wheat flour)

0.25% (rough diamonds)

3% (gold, silver etc.)

(https://taxadda.com/gst-
5% return-service)
12%

18%

28%
Most of the goods fall in the category of 5%, 12% and 18%, while most of the services fall in the
category of 18%. GST of 28% is applicable on some items like cement, car, tobacco. There is also
a Cess which is applicable only on a handful of goods like car, tobacco, pan masala.

There are also goods/services on which GST is applicable at NIL rate or which are exempted.
Read our article regarding Difference between NIL rate, 0% GST rate and exempted
goods/services. (https://taxadda.com/difference-between-zero-rated-nil-rated-non-gst-
and-exempt-supplies/)

You can easily calculate GST amount using our GST Calculator
(https://taxadda.com/calculators/gst-calculator).

Advantages/Benefits Of GST
The main benefits of GST are

Single indirect tax for the whole of India

Input tax credit can be taken for taxes paid in another state

Easy transfer of goods from one state to another

Still has a question? Write a comment below and I will try my best to answer quickly.

Additional Read – Why there is a need for 3 types of GST – CGST, SGST & IGST
(https://taxadda.com/need-3-types-gst/)

Confused about complicated laws? Take our GST consultation services to get your
issues solved from GST experts. Click here to know more. (https://taxadda.com/gst-
consultation/)

Read More Articles

Section 44ADA – Presumptive Registration Under GST

Taxation Scheme for Professionals
(https://taxadda.com/presumptive-
taxation-scheme-professionals-
section-44ada/)
From financial year 2016-17, a new Section 44ADA is
introduced for presumptive income for professionals.
This section is similar to section 44AD for traders.
(https://taxadda.com/gst-
registration/)
Topic Covered in this Article Persons required to
register compulsorily Documents Required for
Registration Fees for Registration Voluntary

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3/28/24, 12:19 PM Basics of GST with Examples - TaxAdda
Under this section professionals such as legal, Registration Time Limit for Registration Effective Date
medical, engineering, architect, accountancy, of Registration Requirements for Registration Can a
technical consultancy, interior decoration or any person take more than one GSTIN Things that

READ ARTICLE » (HTTPS://TAXADDA.COM/PRESUMPTIVE- READ ARTICLE » (HTTPS://TAXADDA.COM/GST-

TAXATION-SCHEME-PROFESSIONALS-SECTION-44ADA/) REGISTRATION/)


Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023


Refund of Unutilised Input Tax Credit
for Zero-Rated Supplies

(https://taxadda.com/refund-of-
unutilised-input-tax-credit-for-
 zero-rated-supplies/)
What is Input Tax Credit under GST? Input Tax Credit
(ITC) means claiming the credit of the GST paid on
the purchase of goods and services which are used
for the furtherance of the business. ITC is a
mechanism to
GST on Import
(https://taxadda.com/gst-on-
import/)
Article 269A of constitution mandates that import of
goods or services in India is considered as Inter-
state trade. Therefore, import of goods or services is
considered as interstate supply and is liable for
payment of IGST. IGST on the import

READ ARTICLE » (HTTPS://TAXADDA.COM/REFUND-OF-

UNUTILISED-INPUT-TAX-CREDIT-FOR-ZERO-RATED- READ ARTICLE » (HTTPS://TAXADDA.COM/GST-ON-

SUPPLIES/) IMPORT/)

Rohit Pithisaria | 19/09/2023 Rohit Pithisaria | 19/09/2023

(https://taxadda.com/gst-
return-service)

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