Goods and Services Tax (GST) is India's unified indirect tax on the supply of goods and services. As a founder, three questions matter: when does the law force you to register, how do you file your returns each month, and how do you reclaim the GST you pay on your own business purchases. Getting this right early keeps you compliant and protects your cash flow, because registration also unlocks the credit that stops tax from piling up at every stage.
When you must register
Registration is driven mainly by your aggregate turnover across a financial year. In most states, the thresholds are:
- Goods: Rs. 40 lakh
- Services: Rs. 20 lakh
- Special category states (most North-Eastern and some hill states): Rs. 20 lakh for goods and Rs. 10 lakh for services
Crossing the threshold makes registration compulsory, but several situations require it from your very first rupee, regardless of turnover, under Section 24 of the CGST Act. The common ones for startups are: making an inter-state taxable supply of goods, selling through an e-commerce operator such as Amazon or Flipkart, and being liable to pay tax under the reverse charge mechanism. If any of these apply, register before you supply.
The GSTIN
On registration you receive a GSTIN, a 15-character alphanumeric identity for that state. Its structure is fixed: the first two digits are the state code, the next ten are your PAN, the thirteenth reflects how many registrations you hold in that state on the same PAN, the fourteenth is a default letter (Z), and the last is a checksum. Because GST is state-wise, a business operating from more than one state needs a separate GSTIN in each. Display your GSTIN on invoices, because your customers need it to claim their own credit.
The main returns: GSTR-1 and GSTR-3B
Two returns form the backbone of monthly compliance:
- GSTR-1 reports your outward supplies, meaning your sales invoices. Monthly filers submit it by the 11th of the following month.
- GSTR-3B is a summary return where you declare total sales, claim your input tax credit, and actually pay the net tax. Monthly filers submit it by the 20th of the following month.
Small taxpayers with turnover up to Rs. 5 crore can opt for the QRMP scheme (Quarterly Return, Monthly Payment). Under QRMP you file GSTR-1 and GSTR-3B once per quarter but still pay tax every month using the PMT-06 challan. Quarterly GSTR-1 is due by the 13th after the quarter, and quarterly GSTR-3B by the 22nd or 24th depending on your state. What you file must match what you pay: the tax collected on sales in GSTR-1 should reconcile with the liability you settle in GSTR-3B.
Input tax credit basics
Input tax credit (ITC) is what makes GST a tax on value added rather than on the full price at every stage. You reduce the GST you owe on sales by the GST you already paid on business purchases. So if you collect Rs. 18,000 of GST on sales and paid Rs. 10,000 on inputs, you remit only the Rs. 8,000 difference.
ITC is conditional. Under Section 16 of the CGST Act, you can claim it only when all of these are true: you hold a valid tax invoice, you have actually received the goods or services, your supplier uploaded the invoice in their GSTR-1 so it appears in your auto-generated GSTR-2B, the supplier has paid the tax to the government, and you have filed your own return. Two limits catch founders out. First, credit for an invoice must be claimed by the earlier of 30 November of the next financial year or the date you file that year's annual return. Second, if you do not pay your supplier the invoice value plus tax within 180 days, you must reverse the credit with interest. Credit is also blocked on certain personal or excluded expenses, so keep business and personal spending separate.
In practice: check your thresholds and Section 24 triggers before you start supplying, register promptly, buy only from GST-compliant vendors so your GSTR-2B stays full, and reconcile GSTR-1, GSTR-3B, and GSTR-2B every month rather than at year-end.