Complete GST Billing Guide
for Indian Small Businesses.

If you run a small business in India and you've ever asked yourself any of these questions:

• Do I even need GST registration for my shop?
• What goes on a GST invoice and what doesn't?
• What's the difference between CGST, SGST, and IGST?
• What is an HSN code and where do I find mine?
• Do I need to file GST returns every month?
• Can I make GST invoices on my phone?

...this guide answers all of them. We'll go from "what is GST" to "your first compliant invoice" in one continuous read. No accountant jargon. No padding. Just what a kirana owner, hardware shop owner, restaurant runner, or service provider needs to know.

A note before we begin: GST rules in India have changed several times since 2017. We've written this based on rules current as of May 2026. Always verify with a chartered accountant before making important business decisions. This guide is educational, not legal advice.

1. What is GST, and why does it exist

Before 2017, India had a billing nightmare. If you sold something in India, you might have had to pay:

• Central Excise Duty (on goods you manufactured)
• VAT (on goods you sold within your state)
• Service Tax (on services you provided)
• Central Sales Tax (on goods you sold to another state)
• Entry Tax (when goods crossed state borders)
• Octroi (in some cities)
• Purchase Tax (on certain raw materials)

Different rates, different rules, different forms, different deadlines, different officers. A shopkeeper selling biscuits in Coimbatore might have dealt with 4-5 different tax departments.

GST replaced all of these with one tax. One registration. One invoice format. One return system. Same rules across India.

That's the elevator pitch. In practice, GST is still complicated — but it's less complicated than what came before.

Who pays GST?

Technically, the customer pays GST. You collect it on behalf of the government, then deposit it.

When you sell sugar for ₹100 + ₹5 GST = ₹105, the ₹100 is your revenue. The ₹5 belongs to the government — you're holding it temporarily. At the end of the month (or quarter), you pay that ₹5 to the GST department.

This is why GST is called an indirect tax — you're not paying it from your profits, you're forwarding it from your customers.

2. Do you need GST registration?

This is the first question every shopkeeper asks. The answer depends on your annual turnover and what you sell.

Threshold limits (as of May 2026)

For businesses selling goods:

• Below ₹40 lakh turnover per year → Registration optional
• Above ₹40 lakh turnover per year → Registration mandatory

For businesses selling services:

• Below ₹20 lakh turnover per year → Registration optional
• Above ₹20 lakh turnover per year → Registration mandatory

Special category states

If you're in any of these states, the threshold is lower (₹20 lakh for goods, ₹10 lakh for services): Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand.

When you MUST register, regardless of turnover

• Interstate sellers — if you sell across state lines (even online)
• E-commerce sellers — selling on Amazon, Flipkart, Meesho
• Casual taxable persons — temporary stalls at exhibitions/fairs
• Reverse charge mechanism — when you receive supplies on which you have to pay GST
• Input service distributors — head office distributing tax credit

For 95% of single-shop owners reading this guide — the ₹40 lakh / ₹20 lakh threshold is what matters.

Should you register voluntarily even if below threshold?

Reasons to register early:

1. You can claim input tax credit — offset the GST your suppliers charged you against the GST you collect
2. B2B customers prefer it — they want a GST invoice so they can claim their own input credit
3. It looks professional — being GST-registered signals an established business
4. You may need it for tenders, contracts, big buyers

Reasons NOT to register early:

1. Filing obligation — once registered, you must file returns every month or quarter, even with zero sales
2. Compliance cost — if you can't do it yourself, you'll pay a CA ₹500-2,000/month
3. Penalty risk — miss a return, get fined

For a kirana store doing ₹10 lakh/year, registration is usually not worth the hassle. For a hardware shop doing ₹35 lakh/year (close to threshold), it might be worth registering to claim input tax credit on your stock purchases.

How to register

GST registration is free and online.

1. Visit www.gst.gov.in
2. Click "Register Now"
3. Submit PAN, email, mobile number for OTP verification
4. Submit business details, address proof, photo, bank account
5. Receive your GSTIN (15-digit number)

Time: 7-15 working days. Cost: ₹0 if you do it yourself; ₹1,000-3,000 if a CA does it for you.

Your GSTIN format: First 2 digits = state code, next 10 = your PAN, then check digit and entity code. Example: 33AABCT1234R1Z6 = Tamil Nadu (33) + PAN + entity code + checksum.

3. The three types of GST: CGST, SGST, IGST

This trips up almost every new GST registrant. Let's make it simple.

The single rule that explains everything

When the seller and buyer are in the same state → CGST + SGST

When the seller and buyer are in different states → IGST

That's it. Same state = split tax. Different state = single tax.

Scenario 1: You sell sugar to a customer in your same state

You're a kirana shop in Coimbatore, Tamil Nadu. Your customer is also in Coimbatore. You sell ₹100 worth of sugar at 5% GST.

• CGST (Central GST): 2.5% = ₹2.50 — goes to central government
• SGST (State GST): 2.5% = ₹2.50 — goes to Tamil Nadu government
• Total GST: ₹5 (split equally)
• Customer pays: ₹105

This is called intra-state supply.

Scenario 2: You sell to a customer in a different state

You're the same kirana shop. A wholesale customer from Bengaluru, Karnataka places an order for ₹10,000 worth of biscuits at 18% GST.

• IGST: 18% = ₹1,800
• CGST: ₹0, SGST: ₹0
• Customer pays: ₹11,800

This is called inter-state supply.

Scenario 3: Service to a different-state customer

You're a Coimbatore web designer. You design a website for a Mumbai client for ₹50,000 at 18% GST.

• IGST: 18% = ₹9,000
• Customer pays: ₹59,000

Services follow the same rule as goods.

Why this matters for billing

Your invoice must show this correctly. If you sell to a Bengaluru customer and bill CGST + SGST instead of IGST, your invoice is wrong. The customer can't claim input credit on it. You'll have problems at GST filing time.

This is why "place of supply" matters. Modern billing apps (including BillZap) auto-detect this based on your state vs the customer's state.

4. The 5 GST rate slabs in India

GST rates aren't random. India uses five main slabs:

0% — Essentials

Fresh vegetables, fresh milk, unbranded rice/atta/dal, fresh fish, salt, books, newspapers, raw eggs, fresh fruits. These are essential items the government wants to keep affordable for everyone.

5% — Lower-priced essentials

Branded packaged rice/atta/dal, sugar, tea, edible oils, footwear under ₹1,000, garments under ₹1,000, branded milk, packaged paneer, frozen meat, life-saving drugs.

12% — Standard rate (lower)

Butter, ghee, processed food, namkeen, frozen vegetables, mobile phones, computers, ayurvedic medicines, sewing machines, bicycles.

18% — Standard rate (higher)

Most services, restaurant food (non-AC), telecom services, IT services, insurance, mineral water, biscuits, ice cream, chocolates, soaps, shampoo, electrical goods, cement, paint.

28% — Luxury & sin goods

AC restaurants, cars, motorcycles over 350cc, air conditioners, dishwashers, washing machines, refrigerators, perfumes, makeup, premium tobacco products, lottery tickets, premium hotel rooms.

Rates within these slabs change

The 5 slabs are stable, but which products fall in which slab changes periodically. The GST Council meets quarterly and reclassifies items.

This is why apps with auto-classified HSN are useful. They keep up with rate changes so you don't have to memorize them.

Special rates outside the standard slabs

• 0.25% — Rough diamonds, precious stones
• 3% — Gold, silver, platinum, jewelry
• GST + Cess — Tobacco, pan masala, aerated drinks, motor vehicles

5. What is HSN code and how to find yours

HSN = Harmonized System of Nomenclature. It's an internationally standardized code that classifies products.

HSN structure

• 2-digit: Chapter (e.g., 17 = Sugars and sugar confectionery)
• 4-digit: Heading (e.g., 1701 = Cane or beet sugar)
• 6-digit: Subheading (e.g., 170199 = Other sugars)
• 8-digit: Tariff item (full detail)

Do you need HSN codes on your invoices?

• Turnover up to ₹5 crore: 4-digit HSN required on B2B invoices, optional on B2C
• Turnover above ₹5 crore: 6-digit HSN required on all invoices

Common HSN codes for Indian small businesses

This is illustrative. Verify the exact code for your products at cbic.gov.in.

SAC codes (for services)

If you provide services instead of goods, you use SAC (Services Accounting Code) instead of HSN. Common examples: 9954 (Construction), 9961 (Wholesale trade), 9963 (Accommodation), 9988 (Manufacturing services).

6. What goes on a valid GST invoice

This is the heart of GST billing. Get this right and you're 80% compliant.

Mandatory fields on a GST invoice

Seller details:

1. Name of supplier (your business name)
2. Address of supplier
3. GSTIN of supplier (your 15-digit GST number)

Invoice details:

4. Unique invoice number (sequential, max 16 characters)
5. Date of invoice

Buyer details (for B2B):

6. Name of recipient
7. Address of recipient
8. GSTIN of recipient
9. Place of supply (state name + code)

Item details:

10. Description of goods/services
11. HSN/SAC code
12. Quantity
13. Unit (kg, pcs, etc.)
14. Rate per unit (excluding tax)
15. Taxable value (rate × quantity)

Tax details:

16. Tax rate (CGST, SGST, IGST percentages)
17. Tax amounts (CGST, SGST, IGST in rupees)
18. Total invoice value (taxable value + total tax)

Example GST invoice layout

═════════════════════════════════════════════════════
TAX INVOICE                          Original for Buyer

TAMIL WHOLESALE CO.                  GSTIN: 33AABCT1234R1Z6
123, RS Puram, Coimbatore - 641002    State: Tamil Nadu

Invoice No: INV-2026-0142            Date: 15-May-2026
Place of Supply: Tamil Nadu (33)
─────────────────────────────────────────────────────
Bill To:
Ramesh & Sons                        GSTIN: 33AAACR5678P1Z2
45, Town Hall, Coimbatore             State: Tamil Nadu
─────────────────────────────────────────────────────
Sl  Item              HSN    Qty   Rate    Taxable
─────────────────────────────────────────────────────
1   Sugar 2kg         1701   2     ₹50/kg   ₹100
2   Salt 1kg          2501   1     ₹20/kg   ₹20
─────────────────────────────────────────────────────
Subtotal                                    ₹120.00
CGST @ 2.5%                                 ₹3.00
SGST @ 2.5%                                 ₹3.00
─────────────────────────────────────────────────────
TOTAL                                       ₹126.00

UPI: 9876543210@paytm                  [QR CODE]
─────────────────────────────────────────────────────
Authorized Signatory:    [signature]
═════════════════════════════════════════════════════

A modern billing app generates all of this automatically — you just enter customer and items. The math, tax classification, and formatting are handled for you.

Common invoice format mistakes

1. Missing GSTIN — your own or the customer's (if B2B)
2. Wrong place of supply — applying CGST+SGST to inter-state, or IGST to intra-state
3. Non-sequential invoice numbers — if you delete an invoice, don't skip the number
4. Missing HSN codes — required above certain turnover
5. Wrong tax rate — applying 18% to a 12% item or vice versa
6. Manual calculation errors — math mistakes that don't add up

7. Tax Invoice vs Bill of Supply

If you're registered under GST: you issue Tax Invoices.

If you're not registered under GST (or you're under composition scheme): you issue Bills of Supply.

If you sell items that are GST-exempt (like fresh vegetables, fresh milk, unbranded grains): you issue Bills of Supply even if you're registered.

Tax Invoice — what it shows

• All the GST fields above
• Tax breakdown (CGST + SGST or IGST)
• Tax amount in rupees
• Customer can claim input tax credit if they're B2B and registered

Bill of Supply — what it shows

• Same as tax invoice, EXCEPT:
• No tax breakdown
• No tax amount
• Title says "Bill of Supply" not "Tax Invoice"
• Customer cannot claim input tax credit

Most modern billing apps switch between Tax Invoice and Bill of Supply automatically based on your registration status.

8. E-invoicing — do you need it?

E-invoicing is a system where invoices are uploaded to the GST portal in real-time and given a unique Invoice Reference Number (IRN) before being sent to the customer.

Who needs e-invoicing

As of mid-2024, businesses with annual turnover above ₹5 crore must issue e-invoices for B2B transactions. This threshold may have dropped further by the time you read this — verify at gst.gov.in.

What this means for small businesses

If you're under ₹5 crore turnover (which covers most kirana stores, restaurants, hardware shops, salons, and tailors) — you do not need e-invoicing. You issue regular GST invoices like always.

What about B2C transactions?

E-invoicing rules apply to B2B transactions (business to business). Your sales to walk-in retail customers (B2C) don't need IRN, regardless of your turnover.

9. GST returns — what you file and when

Once registered, you have to file returns. Here's what that looks like for a typical small business.

GSTR-1 — Outward supplies (sales)

• Monthly (if turnover above ₹5 crore) or quarterly (if turnover up to ₹5 crore)
• Due: 11th of next month (monthly) or 13th of next month after quarter (quarterly)
• What it contains: All your sales invoices for the period

GSTR-3B — Summary return + tax payment

• Monthly for everyone (but smaller businesses get QRMP scheme)
• Due: 20th of next month
• What it contains: Total sales, total purchases, tax payable, tax paid

GSTR-9 — Annual return

• Once per year
• Due: 31st December following the financial year
• What it contains: Full year summary

The QRMP scheme (Quarterly Return, Monthly Payment)

If your turnover is up to ₹5 crore, you can opt for QRMP:

• File GSTR-1 and GSTR-3B quarterly instead of monthly
• But pay tax monthly (estimated, using a simplified challan called PMT-06)
• True-up the actual liability when you file the quarterly returns

For most small businesses, QRMP is a no-brainer. Less filing, easier compliance.

What happens if you miss a return

Late fees:

• ₹50 per day for taxable returns
• ₹20 per day for nil returns
• Maximum ₹5,000 per return

Interest on unpaid tax at 18% per year. GSTIN suspension if you don't file for 6 consecutive months.

Doing returns yourself vs hiring a CA

Do it yourself: ₹0 cost, 2-4 hours/month, higher risk of mistakes.

Hire a CA: ₹500-3,000/month, 30 mins of your time, lower risk.

For shops with 50-200 invoices/month, doing it yourself is doable if you're comfortable with the GST portal. Above 200 invoices/month, a CA is usually worth the cost.

10. Common GST billing mistakes (and how to avoid them)

After watching hundreds of shopkeepers struggle with GST during BillZap's beta, here are the top 10 mistakes:

Mistake 1: Confusing GSTIN with PAN

Your GSTIN is 15 digits. Your PAN is 10 digits. They're related but not interchangeable. Always put GSTIN on invoices, not PAN.

Mistake 2: Non-sequential invoice numbers

If you cancel an invoice, don't skip the number. Mark it cancelled. The next invoice still takes the next number in sequence. Skipped numbers raise audit flags.

Mistake 3: Wrong place of supply

The buyer's state determines place of supply. If your Tamil Nadu shop sells to a Karnataka customer, place of supply is Karnataka. IGST applies. Don't bill CGST+SGST.

Mistake 4: Mixing taxable and exempt items

If a customer buys ₹100 of sugar (taxable) and ₹50 of fresh vegetables (exempt), either: one invoice with tax only on sugar, or two invoices — Tax Invoice for sugar, Bill of Supply for vegetables. Don't lump them with a single tax rate.

Mistake 5: Forgetting to claim input tax credit

Your stock purchases include GST you paid. That's input tax credit. Don't forget to claim it in your GSTR-3B — you're throwing money away if you skip this.

Mistake 6: Not maintaining stock records

GST auditors can ask for stock records. If your invoices show you sold 1,000 kg of sugar but you didn't buy 1,000 kg, you have a problem.

Mistake 7: Late return filing

The late fee is ₹50/day per return. Two missed monthly returns = ₹3,000 in penalties.

Mistake 8: Wrong customer name on B2B invoices

If you're selling to a B2B customer, use their business name and GSTIN, not the individual's name. Otherwise the customer can't claim input tax credit.

Mistake 9: Wrong HSN code

Sugar (1701) is 5% GST. Sugar confectionery (1704) is 18% GST. A wrong HSN means wrong tax rate.

Mistake 10: Manual calculation errors

The biggest source of GST mistakes is doing the math manually. ₹245 × 18% is ₹44.10, not ₹44. Compounded over hundreds of invoices, these rounding errors add up. Use software.

11. How to actually do GST billing without going crazy

You've read through a lot. Here's how to translate it into actual daily practice:

If you're not registered yet

1. Calculate your annual turnover
2. If you're below threshold, don't register yet — keep it simple
3. Issue Bills of Supply (no tax) for now
4. Track turnover monthly
5. When you cross 80% of the threshold, prepare to register

If you just registered

1. Set up a billing app (BillZap, Vyapar, Tally — your pick)
2. Add your GSTIN, state, business address
3. Configure HSN codes for your top 20 products
4. Bill your first 10 customers — review each invoice carefully
5. By invoice 20, the workflow becomes automatic

Daily workflow

1. Customer walks in — start a new invoice
2. Add customer name — if registered, capture their GSTIN too
3. Add items — voice, scan, or type
4. Save & generate — PDF created, UPI QR embedded
5. Customer pays — via UPI scan or cash
6. Mark as paid — with payment mode (Cash/UPI/Bank)

Monthly workflow

1. End of month — review all invoices for completeness
2. Export GSTR-1 data — your billing app generates this
3. Match input tax credit — your purchases vs supplier invoices
4. File GSTR-3B — submit and pay tax
5. File GSTR-1 — submit sales data

Annual workflow

1. End of financial year (March 31) — close books
2. File GSTR-9 — annual return (December 31 deadline)
3. Review with CA — full-year audit

12. GST billing on your phone — the practical setup

In 2026, you don't need a desktop computer for GST billing. Your phone is enough.

What you need

1. Android phone — Android 8.0 or higher
2. A billing app — BillZap (free), Vyapar (freemium), MyBillBook (freemium)
3. UPI ID — for payment QR codes
4. A 4-digit PIN — for app security

Creating your first invoice

Voice method (fastest):

1. Tap the microphone icon
2. Speak: "Ravi 2 kilo sugar 50 rupees, 1 packet biscuits 25 rupees"
3. BillZap parses the customer, items, quantities, rates
4. Review the parsed invoice
5. Tap "Save & Generate"
6. Invoice ready in 10 seconds

Sending the invoice

• WhatsApp share — tap one button, customer gets PDF + UPI link
• Print — if you have a Bluetooth thermal printer
• Email — if customer is B2B
• SMS — with PDF link

Monthly compliance

At end of month:

1. Open Settings → Reports
2. Generate GSTR-1 data export (CSV)
3. Send to your CA, or upload directly to GST portal

That's the full GST billing workflow, 100% on your phone, in 2026.

You're now GST-billing-aware

This guide covered 12 sections, ~5,400 words, and probably more GST knowledge than 80% of Indian small business owners have. You don't need to memorize all of it — bookmark this page, come back when you have specific questions.

The most important takeaways

1. Threshold for registration: ₹40 lakh (goods) / ₹20 lakh (services)
2. GST split: CGST+SGST same state, IGST different state
3. 5 rate slabs: 0%, 5%, 12%, 18%, 28%
4. HSN code: Required on B2B invoices, optional on small B2C
5. Tax Invoice vs Bill of Supply: Registered = Tax Invoice, unregistered = Bill of Supply
6. Returns: GSTR-1 (sales), GSTR-3B (summary), GSTR-9 (annual)
7. E-invoicing: Only above ₹5 crore turnover
8. Use software: Manual GST billing is error-prone and slow

What's next

Now that you understand GST billing, the next questions are:

1. Which billing app should I use? → Read Best Free GST Billing App in India (2026)
2. Which app for my specific business type? → Read Best Billing App for Kirana, Restaurants & Small Shops
3. How do I actually use BillZap? → Read How to Use BillZap: Complete Guide
4. What is BillZap, exactly? → Read BillZap Review: Free GST Billing App for Indian Shops

Frequently Asked Questions

This guide is educational and not legal/tax advice. Always consult a chartered accountant for decisions specific to your business. Last updated May 15, 2026. Email hello@billzap.app for corrections.