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Goods and Services Tax (GST) is a unified tax system that applies to both goods and services in India. While GST on goods is commonly known, understanding the GST Rate for Services is just as important. Many businesses and professionals deal primarily with services. Throughout this article, you will understand the GST rate for services. This blog aims to simplify the complex GST rate structure for services. It helps readers stay updated, ensure compliance, and understand applicable rates, exemptions, and recent changes under GST.
GST on services in India is a tax applied to transactions involving services. It is based on the place where the service is consumed. This is also known as a destination-based indirect tax. The tax is included in the final amount paid by the consumer. GST was introduced on July 1, 2017, which replaced the earlier service tax with a simple multi-stage tax system.
Here is a detailed explanation of the classification of Services under GST:
Taxable services include most business-related services where there is a supply in return for payment. These services fall under four GST slabs—5%, 12%, 18%, or 28%—based on their nature. For example, transport services fall under 5%, while professional, IT, and telecom services fall under 18%. Luxury services such as five-star hotels and amusement parks attract 28%.
Exempt services attract 0% GST. These services do not require GST payment or credit claims. Key exemptions include:
These exemptions help reduce the tax burden on essential and welfare services.
Zero-rated services refer to exports of services from India. Though GST applies at a 0% rate, businesses can still claim input tax credit. This allows exporters to recover taxes paid on inputs. Exporters may choose to pay tax and claim a refund or file a Letter of Undertaking (LUT) to export without tax payment.
Composite supply involves two or more services bundled together, where one is the main service. GST applies at the rate of the main service. For example, hotel stays with breakfast follow the rate for accommodation. Mixed supply includes unrelated services sold together. GST applies at the highest rate among them. For example, a spa and hotel room package attracts 28% GST due to the luxury component.
The Goods and Services Tax (GST) applies to services across India based on a four-tier rate system. These rates reflect the nature and utility of each service. The GST Council defines and updates the rates in consultation with the Central Board of Indirect Taxes and Customs (CBIC). The service classification follows SAC (Services Accounting Code) as per GST law.
Below is the GST rate for Services:
The 5% rate applies to essential services. These include public transport (excluding air-conditioned or luxury variants), goods transport services, and tour operator services under restricted credit conditions. This rate also applies to select job work services for the textile and food processing sectors. The government keeps this rate low to ensure affordability and access to basic services.
This slab includes non-luxury hotel accommodation (room tariffs from Rs. 1,001 to Rs. 7,500), specific transport services, and some construction services related to affordable housing. It also covers services provided by restaurants that do not offer alcohol and non-air-conditioned restaurants. The 12% rate bridges the gap between basic and standard services. The GST Council currently considers the possibility of merging this rate with the 5% slab.
This rate applies to most taxable services. It includes consultancy, legal, IT, telecom, e-commerce platforms, advertising, and digital services. It serves as the standard rate for general services. The government assigns this rate to services that do not fall under essential or luxury categories. Most registered service providers fall under this bracket.
Luxury and entertainment services attract the highest GST rate of 28%. This category includes five-star hotel accommodation (tariff above Rs. 7,500), amusement parks, casinos, and racing services. The government imposes this rate to discourage excessive spending on non-essential luxury services.
Conclusion
Understanding the GST Rate for Services helps businesses comply with tax rules and avoid legal issues. Each service falls under a specific rate slab based on its nature and usage. Whether a service is essential, standard, or luxury, applying the correct GST rate ensures smooth operations. Staying updated with the latest GST changes and exemptions also supports better planning. Clear knowledge of GST rates empowers service providers to manage finances and taxes more effectively. If you have any queries about it, and apart from that, if you want to get GST Registration or GST Return, get in touch with Online Legal India to get assistance.
The standard GST rate for most services in India is 18%. This rate applies to common services such as IT, consulting, telecom, advertising, and professional services unless a specific exemption or lower rate is notified.
Yes, services such as healthcare, education up to higher secondary, public transport (non-AC), and certain agricultural services are exempt from GST. These are notified under Notification No. 12/2017 – Central Tax (Rate) and its amendments.
If services naturally bundle and one service is dominant (like a hotel stay with breakfast), it qualifies as a composite supply. GST applies based on the rate of the main service. If the services are unrelated but sold together for a single price, it becomes a mixed supply, and the highest GST rate among the items applies.