GST on Consultancy Services in India

Understanding GST on Consultancy Services is essential for professionals and businesses in India. Most consulting services have an 18% GST rate. The services can include management, technical, and professional services. This rate applies to the value of the services. It helps to maintain compliance and manage tax liabilities. This will also give the benefit of claiming Input Tax Credit (ITC). In this blog, you will learn about the GST rate on Consultancy Services.

Is GST Mandatory on Consultancy Services?

Yes, GST is mandatory on consultancy services. This can apply in case the annual turnover is more than Rs. 20 lakh (or Rs. 10 lakh is for special category states). This service is known as a taxable service. It usually has an 18% of GST rate. Thus, you need to do registration and tax collection if you move over these amounts.

What is GST on Consultancy Services?

GST on Consultancy Services have an 18% GST rate in India. The rate is applicable as 9% CGST and 9% SGST for intra-state supplies. This can also apply 18% rate of IGST for inter-state supplies. This rate is suitable for:

a) Professional Advisory Services

b) Management'

c) Business

d) Engineering

e) Technical Consultancy

f) Investment, and so on.

These services are given by registered entities. The entities have an annual turnover of more than Rs. 20 lakh (Rs. 10 lakh for special category states). Service providers have the right to claim Input Tax Credit (ITC).

SAC codes for GST on Consultancy Services in India

The SAC code refers to the Service Accounting Code. The GST on consultancy services usually comes under the SAC Code 9983.

Here is the table outlines the SAC codes for Consultancy services:

Exemptions to GST on Consultancy Services in India

Here is an explanation of GST exemption on consultancy services in India:

a) Turnover Threshold

Consultants with an annual turnover is less than Rs. 20 lakhs (or Rs. 10 lakhs for special category states) need not register or charge GST.

b) Government Services

Consultancy services to Central, State Governments, or local authorities may be exempt from GST. This applies if the services are directly related ro the functions entrusted to a Panchayat or Municipality.

c) Foreign Clients

Services that are given to foreign are called exports. They are zero-rated. This means no GST is charged.

d) Specific Exemptions

Certain specialised consultancy may remain GST exempt. This includes educational services leading to a recognised qualification.

Thus, Consultants must check their GST registration requirements based on their turnover

Input Tax Credit (ITC) on Consultancy Services

Input Tax Credit (ITC) is usually available to consultancy services under GST. It is because these services can be said as inputs for business purposes. The services cannot be used for personal use. It also needs a tax invoice, and the supplier must have paid the tax to the government. This will help to claim Input Tax Credit (ITC).

GST Compliance for Consultancy Services

Here are the key GST compliance requirements for consultancy services:

a) Registration Threshold

Businesses need to have an aggregate turnover of more than Rs. 20 lakh (Rs. 10 lakh is for special category states).

b) GST Rate

An 18% tax rate is used for management, technical, engineering, and financial consultancy.

c) Input Tax Credit (ITC)

A consultant who is registered under GST can claim ITC on business expenses.

d) Composition Scheme

A Composition Scheme suitable for services with turnover is not more than R. 50 lakh (6% total tax without ITC).

e) Invoicing:

Tax invoices must have GSTIN (Goods and Services Tax Identification Number). SAC code (usually 9982 or 9983), and need to show an 18% tax breakdown.

f) E-Invoicing

E-invoicing is required for taxpayers who has an annual turnover of above Rs. 10 crore a year. There is a 30-day deadline to report to the Invoice Registration Portal (IRP). It starts from April 1, 2025.

Reverse Charge Mechanism (RCM) on Consultancy Services

As per the GST framework, the Reverse Charge Mechanism (RCM) applies to legal services. These services are given by advocates or firms to business entities. This means the business needs to pay 18% GST. RCM is also suitable for imported consultancy services and some professional services. This includes payments to directors. They will also be able to claim Input Tax Credit (ITC) for business.

Conclusion

GST on consultancy services is significant for businesses in India. There is an GST rate of 18% for most advisory services. Consultant can do GST registration with an annual turnover of above Rs. 20 lakh (Rs. 10 lakh is for special states). This helps them claim Input Tax Credit (ITC) for their business operations. It is important to keep the proper invoices and do timely filing. This helps to keep businesses safe. If you need any type of assistance about registering a GST, contact Online Legal India.

FAQ

Q1. What is the current GST on consultancy services in India?

There is an 18% standard rate for GST on Consultancy Services in India. It includes 9% CGST and 9% SGST for sales within the same state. This can also include 18% IGST for sales between different states. It covers management, financial, IT, HR, technical and so on consulting. This comes under SAC Code 9983. 

Q2. When is GST registration mandatory for consultants?

GST on consultancy services becomes mandatory when your aggregate annual turnover is above Rs. 20 lakhs (Rs. 10 lakhs for special category states).

Q3. Are there any exemptions for GST on consultancy services?

Yes, there are some exemptions for GST on consultancy services. This mainly includes certain medical consultancy services provided by individual doctors. It also includes educational consultancy for institutions.

Q4. Can I claim Input Tax Credit (ITC) on consultancy services?

Yes, you can claim Input Tax Credit (ITC) on Consultancy services. The consultancy services used for business purposes.

Q5. Is GST applicable to freelancers providing consulting?

Yes, GST is applicable to freelancers that provides consulting.

Q6.  What is the common SAC code for consultancy services?

The Consultancy services usually come under the SAC code 9983.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.