If you're running a business in India, you've probably seen these three letters everywhere: CGST, SGST, and IGST. But what do they actually mean? When do you use each one? And most importantly, how do they affect your invoices?

Here's the simple truth: these three taxes form the backbone of India's GST system. When goods are supplied within the same state, both CGST and SGST are collected. When goods are supplied between states, only IGST is collected.

This guide explains exactly when and how to use each, with real examples and clear tables. By the end, you'll know exactly which GST component applies to your transactions.

What Is GST? The Foundation

Before we break down CGST, SGST, and IGST, let's understand what GST is.

Goods and Services Tax (GST) is India's unified indirect tax system introduced on July 1, 2017. It replaced multiple taxes like VAT, excise duty, and service tax with a single tax applied at each stage of production and sale.

The key principle: GST is a destination-based tax. This means the tax revenue goes to the state where goods/services are consumed, not where they're manufactured.

GST is divided into four components based on the location of buyer and seller:

1. CGST — Central GST

2. SGST — State GST

3. IGST — Integrated GST

4. UTGST — Union Territory GST (for Union Territories)

The first three are most common. Let's break them down.

CGST vs SGST vs IGST: Quick Comparison Table

CGST — Central Goods and Services Tax

What Is CGST?

CGST is the Central Goods and Services Tax levied by the Central Government on intra-state supplies of both goods and services.

Key points:

• Applied when buyer and seller are in the same state

• Collected by the Central Government

• Tax revenue goes to the Central Government's account

• Rate is typically half of the total GST rate

CGST Full Form

Central Goods and Services Tax

How Is CGST Calculated?

CGST is calculated on the taxable value of goods/services.

Formula: Taxable Value × (CGST Rate / 100)

Example:

• You sell a laptop for ₹50,000 to a customer in your state

• GST rate is 18% (half for CGST = 9%, half for SGST = 9%)

• CGST = ₹50,000 × 9% = ₹4,500

• This ₹4,500 goes to the Central Government

SGST — State Goods and Services Tax

What Is SGST?

SGST is the State Goods and Services Tax levied by the State Government on intra-state supplies of goods and services.

Key points:

• Applied when buyer and seller are in the same state

• Collected by the State Government

• Tax revenue goes to the respective State Government

• Rate is typically half of the total GST rate

SGST Full Form

State Goods and Services Tax

How Is SGST Calculated?

SGST is calculated the same way as CGST — on the taxable value.

Formula: Taxable Value × (SGST Rate / 100)

Example:

• Same laptop: ₹50,000 to a customer in your state

• SGST rate is 9%

• SGST = ₹50,000 × 9% = ₹4,500

• This ₹4,500 goes to the State Government

Combined CGST + SGST = Total GST for Intra-State Sales

Total GST on the ₹50,000 laptop:

• CGST: ₹4,500

• SGST: ₹4,500

• Total: ₹9,000 (18% of ₹50,000)

• Invoice Total: ₹59,000

IGST — Integrated Goods and Services Tax

What Is IGST?

IGST is the Integrated Goods and Services Tax levied on inter-state supply of goods and services. It is collected by the central government and later apportioned between the centre and states.

Key points:

• Applied when buyer and seller are in different states

• Collected by the Central Government

• Single tax (not split between CGST and SGST)

• Rate is the full GST rate (e.g., 18%, not 9% + 9%)

• Revenue is later distributed between Centre and the consuming state

IGST Full Form

Integrated Goods and Services Tax

How Is IGST Calculated?

IGST is calculated on the taxable value, just like CGST/SGST, but as a single tax.

Formula: Taxable Value × (IGST Rate / 100)

Example:

• You (in Maharashtra) sell the same laptop for ₹50,000 to a customer in Delhi

• IGST rate is 18%

• IGST = ₹50,000 × 18% = ₹9,000

• This ₹9,000 goes to the Central Government (later shared with Delhi)

• Invoice Total: ₹59,000

Key Insight: Same Total Tax, Different Structure

Notice both transactions result in the same ₹9,000 tax:

• Intra-state: ₹4,500 CGST + ₹4,500 SGST = ₹9,000

• Inter-state: ₹9,000 IGST = ₹9,000

The total tax is the same for the buyer. The only difference is how it's split and distributed.

Intra-State vs Inter-State: When Do You Use CGST+SGST vs IGST?

This is the most critical distinction. Your entire invoicing depends on understanding this.

Intra-State Transaction (Same State) = CGST + SGST

When it applies:

• Seller and buyer are in the same state

• Buyer has an address in that state

Example:

• Seller: ABC Ltd, Bangalore (Karnataka)

• Buyer: XYZ Retail, Bangalore (Karnataka)

• Transaction Type: Intra-state

• GST Applied: CGST + SGST

Tax Calculation (18% rate):

• Taxable Amount: ₹10,000

• CGST (9%): ₹900 → Central Government

• SGST (9%): ₹900 → Karnataka Government

• Total GST: ₹1,800

• Invoice Total: ₹11,800

Inter-State Transaction (Different States) = IGST

When it applies:

• Seller and buyer are in different states

• Buyer has an address in a different state

Example:

• Seller: ABC Ltd, Bangalore (Karnataka)

• Buyer: XYZ Retail, Mumbai (Maharashtra)

• Transaction Type: Inter-state

• GST Applied: IGST

Tax Calculation (18% rate):

• Taxable Amount: ₹10,000

• IGST (18%): ₹1,800 → Central Government (split with Maharashtra)

• Total GST: ₹1,800

• Invoice Total: ₹11,800

How to Determine Buyer's State

Always check the buyer's billing address (or registered address for GST purposes).

Common Mistakes:

• ❌ Using buyer's temporary address (wrong)

• ❌ Assuming state based on phone number (wrong)

• ✅ Using buyer's registered GST address (correct)

• ✅ Confirming with buyer if unsure (correct)

Real-World Examples: CGST vs SGST vs IGST

Example 1: Freelancer in Delhi Selling Services

Scenario:

• Freelancer: Ravi Kumar, Delhi

• Client: ABC Ltd, Delhi

• Service: Web design

• Amount: ₹25,000

• GST Rate: 18%

Since both are in Delhi (intra-state):

• CGST = ₹25,000 × 9% = ₹2,250

• SGST = ₹25,000 × 9% = ₹2,250

• Total GST: ₹4,500

• Invoice Total: ₹29,500

Invoice Shows:

Service: Web Design
Amount: ₹25,000
CGST (9%): ₹2,250
SGST (9%): ₹2,250
Total: ₹29,500

Example 2: Business in Maharashtra Selling to Business in Karnataka

Scenario:

• Seller: TechCorp, Mumbai (Maharashtra)

• Buyer: RetailChain Ltd, Bangalore (Karnataka)

• Product: 100 units of software license

• Amount: ₹50,000

• GST Rate: 18%

Since they're in different states (inter-state):

• IGST = ₹50,000 × 18% = ₹9,000

• Total GST: ₹9,000

• Invoice Total: ₹59,000

Invoice Shows:

Product: Software License (100 units)
Amount: ₹50,000
IGST (18%): ₹9,000
Total: ₹59,000

Example 3: Multi-State Transaction with Input Tax Credit

Scenario (3-step supply chain):

Step 1: Manufacturer (Delhi) → Dealer (Delhi)

• Amount: ₹10,000

• GST Rate: 12%

• CGST (6%) = ₹600

• SGST (6%) = ₹600

• Total GST: ₹1,200

• Dealer pays: ₹11,200

Step 2: Dealer (Delhi) → Retailer (Mumbai)

• Purchase Price: ₹11,200 (including GST)

• Resale Price: ₹15,000

• GST Rate: 12%

• IGST (12%) = ₹1,800

• Total GST: ₹1,800

• Retailer pays: ₹16,800

Input Tax Credit Available:

• Dealer had paid ₹1,200 (CGST + SGST) in Step 1

• Dealer collects ₹1,800 (IGST) in Step 2

• Dealer's net GST liability = ₹1,800 - ₹1,200 = ₹600

Step 3: Retailer (Mumbai) → End Customer (Mumbai)

• Resale Price: ₹18,000

• GST Rate: 12%

• CGST (6%) = ₹1,080

• SGST (6%) = ₹1,080

• Total GST: ₹2,160

• Customer pays: ₹20,160

Input Tax Credit:

• Retailer paid ₹1,800 (IGST) in Step 2

• Retailer collects ₹2,160 (CGST + SGST) in Step 3

• IGST credit can offset CGST and SGST

This shows how GST works seamlessly across state borders with input tax credit.

How to Apply Correct GST on Your Invoice

When creating an invoice, follow this checklist:

Step 1: Identify Transaction Type

• [ ] Buyer and seller in same state? → Use CGST + SGST

• [ ] Buyer and seller in different states? → Use IGST

• [ ] Union Territory involved? → Use CGST + UTGST

Step 2: Find Applicable GST Rate

• Check HSN/SAC code

• Verify current rate (18%, 5%, etc.)

• Confirm with CA if unsure

Step 3: Calculate Tax Components

For Intra-State (CGST + SGST):

• CGST = Taxable Amount × (Rate / 2 / 100)

• SGST = Taxable Amount × (Rate / 2 / 100)

For Inter-State (IGST):

• IGST = Taxable Amount × (Rate / 100)

Step 4: Show on Invoice

Invoice must clearly show:

• Taxable amount

• CGST amount (or IGST amount)

• SGST amount (if intra-state)

• Total tax

• Final amount payable

Creating Compliant GST Invoices with Correct CGST/SGST/IGST

Getting the tax components right is critical for compliance. One mistake triggers notices and penalties.

Best Practice: Use a Tool That Auto-Calculates

Instead of manually calculating CGST, SGST, and IGST, use software that automatically applies the correct tax based on buyer/seller location.

You can create free GST invoices at freeinvoicebill.com with automatic CGST/SGST/IGST calculation:

• ✅ Enter buyer's state → System auto-applies CGST+SGST or IGST

• ✅ Select GST rate → Tax is calculated instantly

• ✅ Download PDF → Ready to send to clients

• ✅ No login required → Use immediately

The tool handles all the complexity so you don't have to manually split taxes.

Input Tax Credit: How CGST, SGST, IGST Credits Work

One of GST's biggest benefits is Input Tax Credit (ITC) — the ability to claim credit for taxes paid on purchases against taxes owed on sales.

But ITC for CGST, SGST, and IGST follows specific rules.

ITC Rules by Tax Component

CGST Credit:

• Can be used to offset CGST liability only (not SGST or IGST)

• Carry-forward allowed if unused

SGST Credit:

• Can be used to offset SGST or IGST liability

• Cannot be used for CGST

• Carry-forward allowed if unused

IGST Credit:

• Can be used to offset IGST, CGST, or SGST liability (most flexible)

• This is why IGST is often called "integrated" — it flows seamlessly

Real Example: Claiming ITC

Scenario:

• You bought raw materials for ₹10,000 (intra-state, 18% GST)

• CGST paid: ₹900

• SGST paid: ₹900

• You sold finished goods for ₹25,000 (inter-state, 18% GST)

• IGST to pay: ₹4,500

ITC Claim:

• Use ₹900 CGST credit → Reduce CGST liability (if any)

• Use ₹900 SGST credit → Reduce SGST liability (if any)

• Use remaining credit against IGST:

  • IGST liability: ₹4,500

  • CGST credit: ₹900

  • SGST credit: ₹900

  • Net IGST to pay: ₹4,500 - ₹900 - ₹900 = ₹2,700

CGST Rate vs SGST Rate vs IGST Rate

All three components use the same rate structure (0%, 5%, 18%, 40%), but are split differently.

18% GST Rate Breakdown

5% GST Rate Breakdown

The rates are consistent — only the split changes based on transaction type.

CGST vs SGST: Key Differences Summarized

FAQ: Common Questions About CGST, SGST, and IGST

Q1: Do I charge both CGST and SGST on the same invoice?

A: Yes, but only for intra-state transactions. You charge CGST and SGST together on the same invoice when buyer and seller are in the same state. For inter-state sales, you charge only IGST.

Q2: What's the difference between CGST and SGST percentage?

A: There's no difference in percentage. On an 18% GST transaction:

• CGST = 9%

• SGST = 9% They're equal percentages applied to the same amount. The only difference is who collects and keeps the tax.

Q3: When do I use IGST instead of CGST and SGST?

A: Use IGST when your buyer is in a different state than you. CGST + SGST apply only for intra-state (same-state) sales.

Q4: Can I claim SGST credit against CGST liability?

A: No. SGST credit can be used against SGST or IGST liability, not CGST. Each tax component has specific credit rules.

Q5: What if I don't know the buyer's state?

A: Always ask the buyer for their registered address or GST registration state. Using the wrong state triggers compliance issues. When in doubt, err on the side of IGST (higher safety).

Q6: Does IGST rate differ from CGST + SGST combined?

A: No. The total tax is always the same:

• Intra-state: CGST (9%) + SGST (9%) = 18%

• Inter-state: IGST (18%) = 18% The total tax collected is identical; only the split and distribution changes.

Q7: How do I show CGST and SGST on an invoice?

A: Show both separately:

Taxable Amount: ₹10,000
CGST (9%): ₹900
SGST (9%): ₹900
Total GST: ₹1,800
Invoice Total: ₹11,800

Q8: What is UTGST?

A: UTGST (Union Territory GST) is similar to SGST but applies in Union Territories without a legislature (like Chandigarh, Lakshadweep). It's paired with CGST for intra-UT transactions.

Q9: Can a small business claim ITC on CGST, SGST, IGST?

A: Yes, any GST-registered business can claim ITC, including small businesses. You must maintain proper documentation and file GSTR returns.

Q10: What happens if I invoice with the wrong CGST/SGST/IGST?

A: Tax authorities will issue a notice, demand payment + interest + penalty. It can trigger an audit. Always verify the correct tax component before invoicing.

How State Codes Determine CGST, SGST, or IGST

Each Indian state and union territory has a 2-digit state code. The buyer's state code determines whether you use CGST+SGST or IGST.

Common State Codes

How to Use:

• Buyer's state code = Your state code? → Use CGST + SGST

• Buyer's state code ≠ Your state code? → Use IGST

Invoicing Best Practices for CGST, SGST, IGST

Before Creating an Invoice:

1. Verify Buyer's State:

   • Check their registered address

   • Confirm GST registration state

   • Don't assume based on phone number

2. Determine Transaction Type:

   • Same state = Intra-state (CGST + SGST)

   • Different state = Inter-state (IGST)

3. Confirm GST Rate:

   • Check HSN/SAC code

   • Verify 2026 rate (0%, 5%, 18%, 40%)

   • Consult your CA if unsure

4. Use Compliant Software:

   • Manually calculating = Risk of errors

   • Use software = Auto-correct tax splits

   • https://freeinvoicebill.com auto-applies CGST/SGST/IGST based on buyer location

5. Double-Check Before Sending:

   • Taxable amount correct?

   • CGST or IGST applied? (not both)

   • SGST shown only if intra-state?

   • Total calculation accurate?

Compliance Tips for GST Registration & CGST/SGST/IGST Filing

GST Return Filing:

When you file GST returns (GSTR-1, GSTR-3B), you must report:

• GSTR-1: Outward supplies with CGST, SGST, IGST separately

• GSTR-3B: Tax liability, ITC claimed, and net tax payable

Mistakes in CGST/SGST/IGST split trigger notices and penalties.

Key Compliance Points:

• ✅ Always use correct state code for buyer

• ✅ Split CGST and SGST equally for intra-state sales

• ✅ Use full GST rate for IGST (not half rates)

• ✅ Maintain invoices for 6+ years

• ✅ File GSTR returns on time

• ✅ Claim ITC correctly based on tax component rules

• ✅ Keep documentation for audits

Tools & Resources for CGST, SGST, IGST Invoicing

Free GST Invoice Tool

Freeinvoicebill.com — Create compliant GST invoices:

• ✅ Auto-detects intra-state vs inter-state based on buyer state

• ✅ Automatically applies CGST+SGST or IGST

• ✅ Calculates taxes with zero manual errors

• ✅ Downloads as PDF instantly

• ✅ No login required

• ✅ No data stored on servers (privacy-first)

Official Resources

• GST Portal: gst.gov.in

• CBIC Website: cbic.gov.in

• State GST Offices: For rate clarifications

• Your CA: For business-specific advice

Final Checklist: CGST vs SGST vs IGST

Before you invoice, verify:

• Buyer's state identified correctly

• Buyer's state = Your state?

  • Yes → Use CGST + SGST

  • No → Use IGST

• GST rate verified (0%, 5%, 18%, 40%)

• Taxable amount calculated (after discounts, before tax)

• Taxes split correctly (CGST=SGST for intra-state; single IGST for inter-state)

• Invoice totals verified

• Invoice shows all 16 mandatory GST fields

• Ready to send to client

Key Takeaways

1. CGST (Central GST) + SGST (State GST) apply to intra-state sales (same state). They're split 50-50 from the total GST rate.

2. IGST (Integrated GST) applies to inter-state sales (different states). It's the full GST rate collected by the centre and distributed to states.

3. Total tax is always the same:

   • Intra-state: CGST (9%) + SGST (9%) = 18%

   • Inter-state: IGST (18%) = 18%

4. The key to correct invoicing: Identify buyer's state first. Everything else flows from there.

5. Use tools to avoid errors: Manual tax calculations = risk. Software that auto-applies CGST/SGST/IGST = compliance.

6. ITC rules differ by component: IGST is most flexible; CGST and SGST have specific limitations.

7. State codes determine transaction type: Buyer's state code is your north star for deciding CGST+SGST vs IGST.

Get it right, and your business stays compliant. Get it wrong, and tax notices follow. The difference is just a few clicks with the right tool.

As of September 22, 2025, India's GST structure has been simplified to 0%, 5%, 18%, and 40%, replacing the earlier multi-slab system of 0%, 5%, 12%, 18%, and 28%.

The four current GST slabs are:

• 0% — Essential items (exempted)

• 5% — Merit rate (everyday essentials)

• 18% — Standard rate (most goods & services)

• 40% — Luxury & sin goods (new high rate)

This reform, called GST 2.0, is the biggest tax change since GST was introduced in 2017. It makes invoicing simpler and essentials cheaper.

If you're creating invoices, the GST rate you charge depends entirely on what you're selling. Get it wrong, and tax authorities will notice. Get it right, and your compliance is solid.

GST Rate Changes: Old vs. New (2025-2026)

The previous multi-slab structure (5%, 12%, 18%, 28%) has been simplified into 5%, 18%, and 40%, making essential goods more affordable and simplifying compliance.

Major rate reductions:

• Toothpaste, soap: 18% → 5% (cheaper by 13%)

• Edible oils: 12%/18% → 5% (much cheaper)

• Roti, paneer: 5% → 0% (now free of GST)

• Life insurance: 18% → 0% (completely exempt)

• Small cars, ACs, TVs: 28% → 18% (major relief)

Major rate increases:

• Luxury cars: 28% + cess → 40% (more expensive)

• Aerated drinks, pan masala: 28% + cess → 40% (sin tax)

GST 0% — Nil-Rated & Exempt Items

Foods with Zero GST

• Fresh milk (liquid, pasteurized)

• Roti, paratha, chapati (Indian breads — reduced from 5%)

• Pre-packaged paneer and UHT milk (reduced from 5%)

• Fresh, unbranded eggs

• Unbranded food grains (rice, wheat, pulses, lentils)

Healthcare & Medicine (0% GST)

• 33 life-saving drugs and cancer medicines

• Individual health and life insurance (previously 18%)

• Prescribed medical equipment

Education & Books (0% GST)

• Notebooks, books, educational materials

• Maps and educational stationery

• Certain education services

Example: Buy ₹500 worth of fresh roti. Zero GST. You pay ₹500 flat.

GST 5% — Merit Rate (Everyday Essentials)

Which Foods Have 5% GST?

• Packaged snacks (namkeen, bhujia, biscuits, chips)

• Instant noodles, pasta, chocolates

• Sugar, salt, spices

• Edible oils (cooking oil, ghee, butter, cheese)

• Cereals and cornflakes

Household & Personal Care (5% GST)

• Toothpaste (reduced from 18%)

• Soap and shampoo (reduced from 18%)

• Hair oil and detergent

• Footwear under ₹2,500

Services at 5% GST

• Restaurant services (5-star dining)

• Job work and skilled services

• Some transport services

Example: Buy toothpaste for ₹100.

• GST (5%) = ₹5

• Total = ₹105 (previously would have been ₹118 at 18%)

This 5% rate is called the "Merit Rate" because it applies to items the government wants people to afford.

GST 18% — Standard Rate (Most Common)

18% is now the most common GST rate in India for goods and services that aren't essentials or luxury items.

Electronics & Appliances (18% GST)

• Smartphones and mobile phones

• Laptops, tablets, cameras

• Air conditioners (reduced from 28%)

• Refrigerators, washing machines, microwaves (reduced from 28%)

• TVs (reduced from 28%)

• Electric motorcycles and scooters

Cars & Vehicles (18% GST)

• Small cars and compact vehicles (reduced from 28%)

• Two-wheelers below 350cc

• Electric vehicles (EVs)

Food & Beverages (18% GST)

• Branded packaged foods

• Fruit juices and energy drinks

• Non-alcoholic packaged drinks

• Not aerated drinks (those are 40% now)

Services at 18% GST

• Telecom services

• Professional services (consulting, design, coding)

• Rental and leasing services

• Hotel rooms above ₹7,500 per night

Construction Materials (18% GST)

• Cement

• Steel and iron

• Bricks and tiles

• Construction equipment

Example: Buy a laptop for ₹50,000.

• Base price: ₹50,000

• GST (18%) = ₹9,000

• Total = ₹59,000

GST 40% — Luxury & Sin Goods (New High Rate)

Sin goods such as pan masala, aerated and caffeinated beverages, and luxury vehicles face a steep GST rate of 40%.

This is the highest GST rate, introduced to discourage harmful consumption and maintain revenue.

Vehicles at 40% GST

• Luxury cars (BMW, Mercedes, Audi, etc.)

• High-performance motorcycles (above 350cc)

• Personal-use aircraft

• Yachts and premium transportation

Harmful & "Sin" Goods (40% GST)

• Aerated soft drinks (Coke, Sprite, Fanta, etc.)

• Caffeinated beverages (energy drinks)

• Note: Tobacco & pan masala will move to 40% eventually, but currently stay at 28% + cess until compensation loan is settled

Gambling & Entertainment (40% GST)

• Online betting and gaming

• Casino services

• Horse racing

Example: Buy a luxury car for ₹30 lakh.

• Base price: ₹30 lakh

• GST (40%) = ₹12 lakh

• Total = ₹42 lakh

Special GST Rates: Gold & Precious Stones

3% GST applies to precious metals like gold, and 0.25% GST applies to rough diamonds and unworked precious stones.

Gold & Jewelry (3% GST)

• Gold purchases (unchanged in 2025 reform)

• Finished jewelry and imitation jewelry

• Silver and other precious metals

Diamonds & Precious Stones (0.25% GST)

• Rough diamonds

• Unworked precious stones

• Gemstones in raw form

These special rates protect India's jewelry and gemstone export sectors.

Complete GST Rate List by Category

How Does GST Split Between CGST, SGST, and IGST?

The 18% rate is the total GST, but it's split depending on whether the transaction is within the same state or across states.

Intra-State Transaction (Same State)

Total GST = CGST + SGST (50% + 50%)

Example: You (Maharashtra) invoice a client in Maharashtra, 18% rate:

• Amount: ₹1,000

• CGST (9%): ₹90

• SGST (9%): ₹90

• Total GST: ₹180

• Invoice total: ₹1,180

Inter-State Transaction (Different States)

Total GST = IGST (100%)

Example: You (Maharashtra) invoice a client in Delhi, 18% rate:

• Amount: ₹1,000

• IGST (18%): ₹180

• Total GST: ₹180

• Invoice total: ₹1,180

The total GST collected is the same; it's just split differently depending on state boundaries.

How to Find the Right GST Rate for Your Product or Service

Not every item is obvious. Here's the step-by-step:

Step 1: Know Your HSN/SAC Code

Every good or service has a classification code. The GST rate depends on this code.

• HSN = Harmonized System of Nomenclature (for goods)

• SAC = Services Accounting Code (for services)

Example: Mobile phones = HSN 85171219 (18% GST)

Step 2: Check Official Sources

• CBIC (Central Board of Indirect Taxes & Customs) website

• GST Council notifications

• Your Chartered Accountant (CA)

Step 3: When in Doubt, Use 18%

If you're genuinely unsure, 18% is the default/standard rate for most goods and services. But always verify with your CA before invoicing.

Step 4: Apply the Rate When Invoicing

When you create an invoice, you must show the correct GST rate. Using the wrong rate triggers compliance notices and penalties.

Tip: Use a tool that auto-applies GST rates based on product categories. You can create a free GST invoice at freeinvoicebill.com with updated rates built in. It calculates GST automatically — no guessing, no mistakes.

GST Rate Changes Summary: What's New in 2026?

FAQ: Common GST Rate Questions

Q: What is the highest GST rate in India?

A: 40% — applied to luxury cars, aerated drinks, and gambling services. This is the new high rate introduced in GST 2.0.

Q: Is there a 12% GST rate anymore?

A: No. The 12% slab was eliminated in the September 2025 reform. Items that were 12% moved to either 5% or 18%.

Q: What's the lowest GST rate?

A: 0.25% — for rough diamonds and unworked precious stones. But for practical purposes, 0% (exempt items) is the lowest.

Q: How much GST on mobile phones?

A: 18% GST on all mobile phones (smartphone, feature phone, etc.). HSN code: 85171219.

Q: How much GST on clothes/apparel?

A: Most clothing: 5% GST. Specialty items and high-end apparel may vary. Check HSN code for your specific product.

Q: How much GST on cement?

A: 18% GST on cement (construction material).

Q: How much GST on hotel rooms?

A:

• Rooms < ₹7,500 per night: 5% GST

• Rooms > ₹7,500 per night: 18% GST

• 5-star luxury hotels often charge 18%

Q: How much GST on restaurant food?

A: 5-18% depending on restaurant type and tariff. Most restaurants charge 5% for regular dine-in, 18% for premium/fine dining.

Q: Do all products charge GST?

A: No. Some items are exempt (0% GST) like fresh milk, eggs, education, healthcare. Alcohol and petroleum products are outside GST (still taxed separately).

Q: Can GST rates change in 2026?

A: Yes. The GST Council meets periodically and can revise rates. Stay updated on official notifications.

Q: What if I invoice with the wrong GST rate?

A: Tax authorities will issue a notice, demand payment + penalty, and possibly audit your business. Always verify rates before invoicing.

How to Create Compliant GST Invoices with Correct Rates

Getting GST rates right matters for three reasons:

1. Legal compliance — Wrong rates trigger penalties

2. Accurate tax filings — Your GSTR returns depend on correct rates

3. Customer trust — Transparent, correct invoices build credibility

When creating invoices, ensure:

• ✅ Correct product/service description

• ✅ Correct HSN/SAC code

• ✅ Correct GST rate (0%, 5%, 18%, or 40%)

• ✅ Correct split (CGST+SGST for intra-state, IGST for inter-state)

• ✅ Accurate tax calculation (no rounding errors)

You can create a free GST invoice at freeinvoicebill.com — it has all 2026 GST rates pre-built. Select your product category, and it auto-applies the correct rate. Download as PDF and send to clients. No login required.

Key Takeaways

1. India now has 4 main GST rates: 0%, 5%, 18%, 40%

2. The new system (GST 2.0) simplified the old 5-slab structure

3. Most everyday items are now 5% (essentials) or 18% (standard)

4. Luxury and sin goods are 40% (to discourage harmful consumption)

5. Always verify rates using HSN/SAC codes — don't guess

6. When invoicing, use tools that auto-apply correct rates to avoid errors

7. The 0% rate applies to truly essential items like fresh milk, bread, and medicine

Stay updated on GST Council announcements — rates can change. And always double-check your invoices before sending them to clients.

The good news: you can create a proper, GST-compliant invoice in under 5 minutes using a free online tool. No account needed. No uploading files to some random server. Just fill in your details, download, and send.

This step-by-step guide shows you exactly how.
Why Use an Online Invoice Tool?

Before we dive in, let's address the elephant in the room: why not just use Excel or Word?

Excel problems:

• You have to manually calculate GST. One formula error and your whole invoice is wrong.

• Tax rates change. You'll forget to update them.

• Formatting breaks when you copy-paste.

• You can't quickly generate variations for different clients.

Word problems:

• Editing is a nightmare. Change one number and alignment breaks.

• No automatic calculations.

• Hard to maintain consistency across invoices.

An online invoice tool solves all of this. It auto-calculates tax, maintains consistent formatting, and generates PDF files that look professional — in minutes.

Step-by-Step: Creating Your First Invoice

We'll use freeinvoicebill.com, a free GST invoice generator that requires no login and keeps your data on your device (not on some server).

Step 1: Open freeinvoicebill.com

Go to https://freeinvoicebill.com/ in your browser. You'll see a form on the left and a live preview on the right. No sign-up, no wait. You're ready to go.

Step 2: Add Your Business Details

On the left side, find the section labeled "Your Business". Fill in:

• Business Logo (optional): Click the upload box to add your company logo. Supported formats: PNG, JPG, SVG. This is optional but makes invoices look professional.

• Business / Your Name* (required): Enter your full business name or your name if you're a freelancer.

  • Example: "ABC Consulting" or "Ravi Sharma - Web Developer"

• Address: Your full business address.

  • Example: "Plot 42, Sector 5, Panvel, Maharashtra 410206"

• Phone: Your contact number.

• Email: Your business email.

• PAN No.: Your Permanent Account Number (optional but good to include for credibility).

• GSTIN: Your 15-digit GST Registration Number.

  • Format: 27AABCT1234A1Z0 (15 alphanumeric characters)

  • If you're not GST-registered, leave this blank.

Real Example: Business Name: TechSkills Academy Address: Building A, Tech Plaza, Panvel, Maharashtra 410206 GSTIN: 27AAFCT5678B1Z5

Step 3: Enter Client/Buyer Details

Scroll down to "Bill To (Client)" section. Fill in:

• Client Name* (required): The person or company you're billing.

  • Example: "StartUp Inc." or "Mr. Amit Kumar"

• Billing Address: Their complete address.

• Shipping Address (leave blank if same as billing): If goods are shipping to a different location, put that address here. Otherwise, leave it blank.

• State/UT Code* (required): A 2-digit code for the state where the client is located. This determines whether you use CGST+SGST or IGST.

  • Maharashtra = 27

  • Delhi = 07

  • Karnataka = 29

  • [Full list available online]

• Client GSTIN (optional): If your client is GST-registered, their GST number goes here. Leave blank if they're not registered (end consumers).

Real Example: Client Name: StartUp Inc. Address: Building A, Sector 10, Navi Mumbai, Maharashtra 400701 State Code: 27 (Maharashtra) Client GSTIN: 27AABCT1234A1Z0

Step 4: Fill In Invoice Details

Find "Invoice Details" section:

• Invoice No.* (required): A unique number for this invoice. Can be sequential (001, 002, 003) or with date prefix (INV-2026-001).

  • Important: Never reuse invoice numbers.

• Status: Choose from None, Draft, or Paid. This just stamps the invoice for your records.

• Invoice Date* (required): Today's date. The system auto-fills this, but you can change it.

  • Format: DD/MM/YYYY

• Due Date: When payment is due (optional). Example: 7 days, 15 days, 30 days from invoice date.

• Order Number (optional): If the client gave you a purchase order number, add it here.

• Order Date (optional): When they placed the order.

• Place of Supply: Where the service/goods are being supplied. Usually same as client state.

• Place of Delivery: Where physical goods are being delivered (only relevant for product sales).

• Project / Subject: A brief subject line for the invoice.

  • Example: "Web Development Services - January 2026" or "Laptop Supply"

Real Example: Invoice No: INV-2026-001 Invoice Date: 28 Feb 2026 Due Date: 15 Mar 2026 Subject: Web Design & Development Training

Step 5: Set GST Type & Rate

Scroll to "GST & Pricing" section:

• GST Type: Choose one:

  • IGST (Inter-state): Use this if the client is in a different state than you.

    • Example: You're in Maharashtra, client is in Delhi → IGST applies

  • CGST + SGST (Intra-state): Use this if both you and client are in the same state.

    • Example: Both in Maharashtra → CGST (9%) + SGST (9%) = 18% total

      

• IGST % or SGST %: Enter the applicable tax rate.

  • Common rates: 0%, 5%, 12%, 18%, 28%

  • The rate depends on what you're selling. Verify with your CA before submitting.

  • Example: Services usually fall under 18%. Some goods might be 5% or 12%.

• Price Entry Mode: Choose how you want to enter prices:

  • Rate excl. GST (recommended): Enter the base price, GST is added on top. Most transparent.

    • Example: ₹1,000 + 18% GST = ₹1,180

  • Rate incl. GST (MRP): Enter the final price, GST is calculated backward.

    • Example: Enter ₹1,180, system calculates that ₹1,000 is base + ₹180 is GST

Real Example: GST Type: CGST + SGST (both client and you in Maharashtra) SGST %: 9 CGST %: 9 Price Entry Mode: Rate excl. GST

Step 6: Add Line Items (Products/Services)

This is where you list what you're charging for. Find "Line Items" section with a table.

Click "+ Add Line Item" and fill in:

• Description: What are you selling? Be specific.

  • Example: "Web Development - Homepage Design (5 pages)" or "Laptop Computer - Dell XPS 13, 512GB"

• HSN/SAC: Harmonized System of Nomenclature code (for goods) or Services Accounting Code (for services). Optional but recommended for GST compliance.

  • Example: 998361 (for professional services)

• Qty: How many units? Could be pieces, hours, kg, or custom units.

  • Example: 1, 5, 40 hours

• Rate (₹): Price per unit (before GST if you selected that mode).

  • Example: ₹2,000 per unit or ₹500 per hour

The tool automatically calculates Net Amt (Qty × Rate).

Add multiple line items if you're charging for different things.

Real Example: | Description | HSN/SAC | Qty | Rate (₹) | | Web Development Service - 5-page website | 998361 | 1 | 45,000 | | Additional page design | 998361 | 2 | 5,000 |

Net Amt: ₹55,000 (before tax)

Step 7: Apply Discount & Shipping (If Applicable)

Scroll to "Charges & Adjustments":

• Discount (%): If you're giving a discount, enter the percentage.

  • Example: 10% early bird discount

  • The system calculates the new amount after discount and applies GST on that reduced amount.

• Shipping (₹): Add shipping cost if applicable (for product sales).

  • Example: ₹500 shipping charge

  • Shipping charges are usually taxable, so GST applies.

• Deposit Already Paid (₹): If the client already paid a deposit/advance, enter it here.

  • Example: ₹10,000 advance received

  • This reduces the final amount due.

Real Example: Original amount: ₹55,000 Discount: 10% = ₹5,500 New taxable base: ₹49,500 GST (18%): ₹8,910 Total: ₹58,410 Deposit paid: ₹10,000 Final due: ₹48,410

Step 8: Add Payment & Notes (Optional But Recommended)

Find "Payment & Notes" section:

• Payment Method: How do you want to be paid? Select from:

  • Bank Transfer / NEFT / RTGS

  • UPI

  • Cash

  • Cheque

  • Razorpay

  • PayPal

• UPI ID (if using UPI): Your UPI address.

  • Example: yourname@okhdfcbank

• Bank Details / Payment Instructions: Your bank account details or payment instructions.

  • Example: "Account: ABC Bank, Acc No: 123456789, IFSC: ABCD0123456"

• Notes to Client (optional): Any message for the client.

  • Example: "Thank you for your business!" or "Payment due within 7 days."

• Terms & Conditions: Your standard T&Cs, cancellation policy, warranty info, etc.

  • Example: "All services rendered are final and non-refundable."

Real Example: Payment Method: UPI UPI ID: techskills@okhdfcbank Bank Details: State Bank of India, Account: 123456789, IFSC: SBIN0001234 Notes: "Thank you for choosing us. Payment due within 7 days."

Step 9: Check the Live Preview

On the right side of the screen, you'll see a live preview of your invoice in real-time. As you fill in fields on the left, the preview updates instantly.

Look for:

• All your details are correct

• Client details match their address

• Line items and amounts are accurate

• GST is calculated correctly

• Total amount looks right

If something looks off, edit it on the left — the preview updates automatically.

Step 10: Download the Invoice

Once everything looks good:

1. Click the "Export Invoice" button (top of the form)

2. A popup appears with format options:

   • 📥 Download PDF: Saves a PDF to your device. Most common — send this to clients.

   • 🖨️ Print: Opens your browser's print dialog so you can print directly.

3. Click "Download PDF"

The PDF is now on your device (usually in Downloads folder). It's ready to send to your client.

Tip: The PDF includes all GST details, calculation breakdowns, and your business information. It's fully compliant and tax-authority acceptable.

Common Questions

Q: Do I need to be GST-registered to use this tool? A: No. You can use it even if you're not GST-registered. If you're not registered, just leave the GSTIN field blank. The tool will generate an invoice without GST details (or with 0% tax).

Q: Is the invoice legally valid? A: Yes, as long as it contains all mandatory fields (invoice number, date, descriptions, amounts, GST details, your details, client details). This tool generates compliant invoices. However, always verify calculations with your Chartered Accountant before filing returns.

Q: Can I save my invoices? A: Your data auto-saves in your browser. Close the page, come back tomorrow, and your last invoice is still there. However, the tool doesn't store invoices permanently — if you clear browser history or switch devices, they're gone. Always download the PDF and keep it safe.

Q: Can I edit an invoice after downloading? A: The PDF is a finished file — you can't edit it in the tool after downloading. If you need changes, go back, edit the form, and download again. The tool retains your data, so it's quick.

Q: What if my GST rate is not in the dropdown? A: GST rates change. If yours isn't listed, enter it manually in the percentage field. Common rates are 0%, 5%, 12%, 18%, 28%. Verify with your tax consultant before using a custom rate.

Q: Is my data safe? A: Your data never leaves your browser. It's stored locally on your device, not on any server. No one sees your invoices but you. This is privacy-by-design — no accounts, no passwords, no data leaks.

Q: Can I use this for retainers or monthly invoices? A: Yes. There are pre-built Quick Templates on the form:

• 🧑‍💻 Freelance / Consulting

• 📦 Product Sales

• 🔄 Retainer / Monthly

• 🎨 Creative Services

Click one and the form pre-fills with relevant fields.

Pro Tips

1. Use consistent invoice numbering. Start with INV-2026-001 and increment. Never skip or reuse numbers.

2. Save all PDFs in a folder. Keep invoices organized by year/month. You'll need them for GST filings and audits.

3. Mention payment terms upfront. Whether it's "Net 7" or "Net 30," always specify. Reduces payment delays.

4. Add your UPI ID or bank details. Clients appreciate easy payment options. More complete = higher payment conversion.

5. Keep a copy for yourself. Before sending to the client, save one for your records.

6. Verify GST calculations. Run one invoice by a CA to ensure rates are correct. Then use that as your template.

7. Use templates for repeat clients. If you invoice the same client monthly, the tool remembers their details. Just update line items and dates.

You're Done

That's it. You've created a professional, GST-compliant invoice in minutes — no spreadsheet formulas, no formatting headaches, no calculation errors.

The next time you need an invoice, you know exactly where to go: freeinvoicebill.com. Fill in the details, download, and send. Your client gets a professional-looking invoice. You have a compliant record for taxes. Everyone's happy.

This guide walks you through every mandatory field, optional details, and common mistakes — so you can create compliant invoices from day one.

What is a GST Invoice?

A GST invoice is a legal document issued by a registered GST supplier to a buyer. It records the transaction details, tax breakdowns, and payment terms. Unlike traditional invoices, GST invoices are mandatory under the Goods and Services Tax system and must follow a strict format defined by the GST Council.

If you're GST-registered, you must issue a GST invoice for every supply (goods or services). If you're not registered but have a registered buyer, you still need to issue one. The format applies whether you're selling physical products, offering services, or both.

Mandatory Fields in a GST Invoice

The GST Council mandates 16 specific fields that must appear on every GST invoice. Missing even one can make your invoice non-compliant.

1. Invoice Number Every invoice must have a unique sequential number. Example: INV-2026-001, or simply 001 if you're tracking separately by month/year. The number must be consecutive — you can't skip numbers or reuse them.

2. Invoice Date The date the invoice is issued. Format: DD/MM/YYYY. This matters because GST is filed monthly, and the invoice date determines which tax period it belongs to.

3. Supplier Details The person/business issuing the invoice must provide:

• Name (legal name or trade name)

• GST Registration Number (15 digits)

• Address (full address of the principal place of business)

• State code (2-digit code, e.g., 27 for Maharashtra)

• Contact details (optional but recommended: phone, email)

Example: "ABC Digital Services Pvt Ltd, GST Reg: 27AABCT1234A1Z0, Plot No. 42, Sector 5, Panvel, Maharashtra 410206"

4. Buyer/Customer Details Must include:

• Name of the recipient

• GST Registration Number (if they're GST-registered)

• Address (full address)

• State code

If the buyer is not GST-registered (consumer), you can skip the GST number but must mention they're unregistered.

5. Ship-To Address (if different) If goods are shipped to a different location than the billing address, provide the complete shipping address with state code.

6. Billing Period If it's a periodic invoice (monthly retainer, subscription), mention the period covered. Example: "For the month of February 2026" or "15 Jan - 15 Feb 2026".

7. Item Description Clearly describe what's being sold:

• For goods: product name, variant, model number

• For services: service name, duration, scope

• HSN Code (if applicable — see article #4 in this series)

Example: "Web Development Service - Homepage Design & Development (5 pages)" or "Laptop Computer - Dell XPS 13, Silver, 512GB SSD"

8. Quantity & Unit

• Quantity: How many units (pieces, hours, kg, etc.)

• Unit: The measurement (nos./pcs for items, hours for services, kg for goods)

Example: "5 nos." or "40 hours" or "10 kg"

9. Rate/Price (Pre-Tax) The price per unit before GST. This is the base amount.

Example: ₹2,000 per unit or ₹500 per hour

10. Line Item Total (Pre-Tax) Quantity × Rate. This is the subtotal for that line before tax.

Example: 5 nos. × ₹2,000 = ₹10,000

11. Discount (if any) If you're giving a discount, mention it separately. It can be:

• Percentage: 10% discount

• Fixed amount: ₹1,000 discount

• This reduces the taxable value

Example: If line total is ₹10,000 and discount is 10%, taxable amount becomes ₹9,000

12. Taxable Value The amount after discount, on which GST is calculated. This is critical — GST is calculated on this amount, not the original price.

13. CGST, SGST, IGST Rates & Amounts This is where the three GST components appear:

• CGST (Central GST): Goes to the Central government

• SGST (State GST): Goes to the State government

• IGST (Integrated GST): Used for inter-state supplies

Rates depend on the product/service. Common rates are 5%, 12%, 18%, 28%. Some items are 0% (exempt).

Example (for intra-state supply at 18% rate):

• Taxable Value: ₹9,000

• CGST (9%): ₹810

• SGST (9%): ₹810

• Total Tax: ₹1,620

Example (for inter-state supply at 18% rate):

• Taxable Value: ₹9,000

• IGST (18%): ₹1,620

• Total Tax: ₹1,620

14. Total Amount (inc. Tax) Taxable Value + Total Tax

Example: ₹9,000 + ₹1,620 = ₹10,620

15. Payment Terms & Due Date When should the buyer pay? Options:

• Due on receipt

• Net 15 days

• Net 30 days

• Custom terms

Example: "Payment due within 7 days of invoice date"

16. Terms & Conditions / Notes Any additional information: cancellation policy, payment instructions, bank details, warranty terms, etc.

Optional but recommended: Include your bank account details and UPI ID for easy payment.

Complete Invoice Example

Here's a real-world example to tie it all together:

Common Mistakes to Avoid

1. Mismatched State Codes — If supplier and buyer are in different states, use IGST (18%), not CGST + SGST. Double-check the state codes.

2. Missing GST Number — If the buyer is GST-registered, their GST number is mandatory. Missing it can invalidate the invoice.

3. Wrong Tax Rate — Always verify the correct GST slab for your product/service. A 5% item charged at 18% is a red flag for tax authorities.

4. Rounding Errors — Calculate taxes correctly to the last paise. Rounding inconsistencies across invoices attract scrutiny.

5. Duplicate Invoice Numbers — Each invoice number must be unique and sequential. Never reuse numbers, even if you've cancelled an invoice.

6. Missing Recipient Details — Buyer name and full address are non-negotiable. Vague addresses like "Mr. Sharma, Delhi" won't cut it.

7. Post-Dated Invoices — Never issue an invoice with a future date. It should match the actual date of supply.

Digital vs. Physical Invoices

GST law recognizes both digital (PDF, email) and physical (printed) invoices as long as they contain all 16 mandatory fields. Digital invoices must be in a standard format (PDF, JSON, or E-Way Bill format).

If you're sending digital invoices, use a tool that generates compliant formats. You can create a free GST invoice at freeinvoicebill.com — no login required. It generates invoices in the correct format, calculates tax automatically, and handles state codes so you don't have to worry about mistakes.

Invoice Storage & Retention

Keep all invoices — issued and received — for at least 6 years. GST authorities can ask for them during audits. Store them digitally in a secure location with timestamps. Physical invoices should be filed chronologically for easy retrieval.

Final Checklist

Before you send an invoice, verify:

• Invoice number is unique and sequential

• Invoice date is today's date (not future-dated)

• Your GST number and registered address are correct

• Buyer's GST number is correct (if they're registered)

• Item description is clear and specific

• Quantity and rate are accurate

• Discount is applied correctly (if any)

• Tax rate matches the product/service GST slab

• CGST + SGST = IGST (for correct calculation)

• Total amount is correctly calculated

• Payment terms are mentioned

• All mandatory 16 fields are present

Getting the GST invoice format right from the start saves you headaches during tax season. It's the difference between smooth filing and scrambling to explain discrepancies to tax authorities.