GST Basics: Supply, Types & Rates
Everything you need to know about GST Threshold Limits, the concept of Supply, Types of Supply (CGST, SGST, IGST), GST Charge, Taxable Value, GST Rate Slabs, Input Tax Credit (ITC), and Key Terms — explained simply.
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Day 2 GST Reel – CA Devesh Thakur
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GST Threshold Limit (Registration)
Before any GST obligation arises, a person or business must cross the GST Registration Threshold — the minimum aggregate turnover limit prescribed under the GST law. Only after crossing this threshold does one become liable to register and charge GST.
Goods
The registration threshold for suppliers of goods is ₹40 Lakh for most states, reduced to ₹20 Lakh for special category (hilly/NE) states.
Services
For service providers, the threshold is ₹20 Lakh (general states) and ₹10 Lakh for special category states.
💡 Why This Matters
Small businesses with turnover below these limits are exempt from GST registration, reducing compliance burden. Once you cross the threshold, GST registration becomes mandatory — and the taxable event that triggers GST is “Supply”.
What is Supply? The Taxable Event
Under GST, Supply is the central taxable event — meaning GST is levied whenever there is a “supply” of goods or services. This is unlike the old indirect tax regime where different taxes applied to different events (e.g., VAT on sale, Service Tax on services).
Three Schedules Around Supply
- Schedule I (Sch I): Activities treated as supply even without consideration — e.g., permanent transfer of business assets, gifts to employees exceeding ₹50,000, etc.
- Schedule II (Sch II): Activities/transactions to be treated as Supply — clarifies what constitutes goods vs. services in ambiguous situations.
- Schedule III (Sch III): Activities NOT treated as Supply — e.g., services by an employee to employer, sale of land, actionable claims (other than lottery/gambling), etc.
The concept of supply covers the entire chain — from the Supplier / Seller on one end to the Recipient / Buyer on the other. The sale transaction generates an Output Liability for the seller and an Input Tax Credit (ITC) opportunity for the buyer.
Types of Supply
One of the most important concepts in GST is determining the type of supply — whether it is intra-state (within the same state) or inter-state (between different states/Union Territories). This determines which tax components apply.
| Type of Supply | Route | Tax Applied | Example |
|---|---|---|---|
| Intra-State (UT) | Supplier → Recipient (Same UT) | CGST + UTGST | Delhi seller to Delhi buyer (UT rules) |
| Intra-State | Seller (DL) → Buyer (DL) | CGST + SGST | Delhi seller to Delhi buyer |
| Inter-State | Seller (DL) → Buyer (HR) | IGST | Delhi seller to Haryana buyer |
| Inter-State (CH) | Seller (DL) → Recipient (CH) | IGST | Delhi seller to Chandigarh (UT) |
CGST
Central GST — Collected by the Central Government on intra-state transactions. Goes to the Centre.
SGST
State GST — Collected by the State Government on intra-state transactions. Goes to the State.
UTGST
Union Territory GST — Applicable in Union Territories without legislature (Delhi uses SGST). Replaces SGST in UTs.
IGST
Integrated GST — Charged on inter-state supply and imports. Collected by the Centre and shared with the destination state.
Input Tax Credit (ITC)
The concept of Input Tax Credit (ITC) is what makes GST a value-added tax. When a buyer (recipient) pays GST on a purchase, that GST paid becomes an “input credit” which can be used to set off against the output GST liability.
🔑 How ITC Works
- Seller charges GST → This becomes Output Liability for the seller.
- Buyer pays GST → This becomes an Input Tax Credit (ITC) Asset for the buyer.
- The buyer can use this ITC to reduce the GST payable on their own sales.
- Example: Advance Tax can also be used as ITC to set off future liability.
- ITC can be used to set off: IGST first, then CGST, then SGST (in the prescribed order).
GST Charge & Taxable Value
GST is not charged on just any amount — it is charged on the Taxable Value. Understanding what constitutes taxable value is essential for computing accurate GST liability.
Transaction Value
The starting point — the price actually paid or payable for the supply of goods/services when the parties are not related and price is the sole consideration.
Inclusions
Certain amounts must be added to transaction value: e.g., Commission charges and Packing charges are included in taxable value.
Exclusions
Certain amounts can be deducted from transaction value: e.g., Trade Discount given at or before time of supply is excluded from taxable value.
📌 Valuation — Key Point
The topic of Valuation (what adds to and what deducts from taxable value) is a detailed subject covered in depth separately. The core formula is:
Taxable Value = Transaction Value + Inclusions − Exclusions
GST Charge = Taxable Value × Applicable Rate %
GST Rate Slabs
India’s GST rate structure has multiple slabs. Each slab is divided equally between CGST and SGST for intra-state supplies (or fully as IGST for inter-state). There is also a 0% (nil-rated) category.
📌 Remember
For inter-state supply, IGST = CGST + SGST rate combined (e.g., 18% IGST = 9% CGST + 9% SGST equivalent). The revenue is later apportioned between Centre and State.
Key GST Terms You Must Know
Day 2 also introduces important terminology that forms the vocabulary of GST. Comment ‘TERMS’ on the Instagram reel to get the full detailed notes!
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