Businesses that want to sell into India must understand India’s goods and services tax (GST) rate. While a standard rate applies to most goods and services, there are multiple tax rates for certain categories as well as special treatment for cross-border transactions. In the 2024–2025 tax year, India collected 22 trillion Indian rupees (INR) in GST revenue, equivalent to roughly $240 billion.

Below, we’ll discuss how the India GST rate applies across goods and services, which transactions are taxable, and how businesses can stay compliant.

What’s in this article?

• What is the India GST rate?
  
• How do GST rates in India differ by goods and services?
  
• Which transactions are subject to GST in India?
  
• Who is required to register for GST in India?
  
• How do you register for GST in India?
  
• How can businesses manage GST compliance in India?
  
• What is India’s GST Council?
  
• How Stripe Tax can help
  

What is the India GST rate?

The standard GST rate in India is 18%. This applies to the majority of goods and services sold in the country. But India also uses a tiered system designed to tax everyday essentials lightly and impose higher taxes on a narrow set of luxury and harmful products.

How do GST rates in India differ by goods and services?

India’s GST system uses different tax rates to reflect how goods and services are consumed across the economy. Here are the main categories:

• 18% standard rate: This is the default rate for most of the economy, covering everything from electronics and consumer goods to professional services, software, logistics, and hospitality.

• 5% lower rate: This rate applies to many everyday necessities—including basic food items, agricultural products, household staples, and select transportation services—with the goal of keeping prices accessible.

• Zero-rated and exempt sales: Unprocessed food items, healthcare services, life-saving drugs, and education services are exempt from GST. Zero-rated items (mostly exports or special economic zone supplies) are charged 0% GST. But unlike exempt sales, zero-rated transactions allow businesses to claim refunds for taxes on goods or services used to make related supplies.

• Precious metals and stones: Gold and precious jewelry are taxed at 3.00%, while rough precious stones are taxed at 0.25%. This reflects the high-value, low-margin nature of these industries.

• 40% rate for “sin goods”: High-end vehicles and gambling are taxed at this higher rate, as are tobacco, sugary beverages, and ultra-processed foods. Alcohol isn’t taxed at this rate.

Which transactions are subject to GST in India?

GST in India applies broadly to commercial activity across the country. That includes the following transactions:

• Domestic sales of goods and services: Most sales within India, whether they’re B2B or B2C, are subject to GST at the applicable rate for the product or service.

• Interstate transactions: Sales made from one Indian state to another are taxed under integrated GST (IGST), which replaces multiple state-level taxes with a single, unified charge.

• Imports of goods: Imported goods are subject to GST at the same rate that applies to equivalent domestic goods. GST is usually paid when goods clear customs.

• Imports of services: When an Indian business purchases certain services from a foreign supplier, GST applies under the reverse charge mechanism. This requires the Indian buyer to account for the tax.

• Ecommerce and online sales: Online transactions are fully within the GST system. These include sales made through marketplaces and digital services sold to Indian customers.

• Cross-border digital services: Foreign providers of digital services to Indian customers must register and charge GST, even without a physical presence in India.

Who is required to register for GST in India?

GST registration in India is driven mainly by turnover, but certain types of activity trigger mandatory registration regardless of size. Consider the following:

• Businesses that exceed the turnover threshold: Companies that provide services must register if their annual turnovers exceed 2 million INR (20 lakh for short), while those that sell goods must register once turnover exceeds 4 million INR (40 lakh). Higher thresholds apply in some states.

• Interstate suppliers: Any business that makes taxable sales from one Indian state to another must register for GST, even if total turnover is below the standard threshold.

• Ecommerce sellers and operators: Companies that sell through online marketplaces are required to register, and marketplace operators have additional tax collection obligations.

• Nonresident and foreign businesses: Overseas businesses that supply taxable goods or services to India, including digital services, must register for GST from their first sale.

• Businesses subject to reverse charge: Entities that are required to pay GST under the reverse charge mechanism must register regardless of turnover.

• Agents and special entities: Registration is mandatory for input service distributors, agents who make sales on behalf of others, and entities required to deduct or collect tax at source under GST.

How do you register for GST in India?

GST registration in India is fully digital and completed through the GST portal, with applications typically approved within a few working days if documentation is complete and accurate. Applicants must provide a permanent account number for Indian entities, along with incorporation or registration documents that establish the business’s legal structure. Proof of the principal place of business, such as a lease agreement, ownership document, or utility bill tied to the business address, is required.

As part of registration, businesses must designate authorized individuals to manage GST filings and correspondence, supported by identity and contact details. Foreign companies that register for GST might need to appoint an Indian authorized representative and, in some cases, pay an advance tax deposit based on expected liability.

Businesses must register for GST in each Indian state or union territory where they have a taxable presence. They’re issued a unique GST identification number for each registration.

How can businesses manage GST compliance in India?

Businesses that handle GST compliance well tend to treat it as an ongoing process tied closely to billing, accounting, and reporting. Here’s how to stay compliant with GST in India:

• File regular returns: Most companies file GST returns monthly or quarterly, reporting sales, purchases, and net tax payable. They also file annual returns that reconcile the full year. Businesses need to file a return in each state where they operate. They can file all of them through a single portal.

• Keep an eye on classification: Carefully map products and services to GST rate codes to avoid misclassification, which can lead to audits or denied credits.

• Create compliant invoices: GST-compliant invoices must include specific details such as GST identification numbers, tax rates, and place of supply information. That necessitates invoicing accuracy.

• Track input tax: Businesses actively monitor GST paid on inputs to ensure credits are claimed correctly and matched with supplier filings.

• Automate when possible: Many businesses use tools like Stripe to calculate GST automatically, reconcile returns, and minimize manual errors, especially when they operate across states or sell internationally.

What is India’s GST Council?

India’s GST rates are decided by the GST Council, a federal body designed to balance national consistency with state-level priorities. It’s chaired by India’s union finance minister and includes finance ministers from every Indian state and union territory, which gives both the central and state governments a direct role in GST decisions. The council periodically adjusts rates to simplify the system, respond to inflation, support specific industries, or correct unintended outcomes such as excessive tax burdens on essential goods.

The council meets to discuss and approve GST rates, exemptions, and major policy changes, usually based on detailed analyses from technical committees that assess revenue impact and economic effects. Proposals require a weighted majority vote, although decisions are typically reached by consensus in practice to preserve stability and predictability in the tax system.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, value-added tax (VAT), and GST on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.