AP Startup Hub

GST slab explained: rates, rules and why they matter for your business

If you’ve just started a venture in Andhra Pradesh, the term “GST slab” probably pops up in every tax chat. It’s basically the tax percentage your products or services fall under. Knowing the right slab saves you from surprise bills and keeps compliance smooth.

India’s GST system has four main slabs – 0%, 5%, 12%, 18% and 28%. Some items also attract a special rate of 3% for essential goods. The government assigns each slab based on the nature of the product, not the size of your business. For example, basic food grains sit at 0%, while restaurant meals are usually 5%, and most services land at 18%.

How to figure out which slab applies to you

The first step is to check the GST rate schedule on the official portal or the latest finance ministry notification. Look up your product code (HSN) – every item has a six‑digit code that tells the tax engine which slab to pick. If you sell a mix of items, you’ll need to apply different rates to each line on your invoice.

Startups often overlook the “composition scheme”. If your annual turnover is below ₹1.5 crore, you can opt for a flat 1% (or 6% for services) on your total sales, bypassing the regular slab system. This simplifies filing but locks you into a lower input tax credit, so weigh the pros before you commit.

Impact of the GST slab on cash flow and pricing

Higher slabs mean you collect more tax from customers, but you also get a larger input tax credit on purchases. If your inputs are taxed at a lower slab than your sales, you might end up paying the difference out of pocket. That’s why many founders do a quick margin check: subtract the GST they’ll owe from the selling price, then add the credit they can claim on raw materials.

Let’s say you sell handmade bags at a 12% slab and buy fabric at 5%. You’ll owe 12% on sales, but you can claim back the 5% you paid on fabric. The net GST you remit is effectively 7% of the sale value. Understanding this math helps you set realistic prices without hurting profit.

Don’t forget state‑specific nuances. Some states offer additional cess or reduced rates for locally produced goods. For startups in AP, the state government occasionally rolls out incentives for tech‑linked services, lowering the effective slab temporarily. Keep an eye on announcements – they can shave a few percentage points off your tax bill.

Finally, stay on top of filing deadlines. Missing a GST return can attract hefty penalties, and the tax authority may audit your slab classification. Use simple accounting software that automatically pulls the correct HSN code and applies the right rate. It takes minutes daily, but it prevents headaches later.

In a nutshell, the GST slab is just a tax rate tied to what you sell. Identify your product’s HSN, match it to the current slab, consider the composition scheme if you qualify, and run the numbers to see how it affects your cash flow. With the right slab knowledge, you can price smarter, claim the right credits, and keep your startup’s finances on the right track.