From CA to legal, services form a major part of India’s professional economy. Like any other goods or services, Goods and Services Tax (GST) applies to professional services, including CA, legal services, consulting and more. GST on professional services, however, has been revised under the new GST 2.0 reform.
To both businesses and service providers, it is important to understand GST professional services in India to ensure that they comply with the regulations and claim Input Tax Credits (ITC). In this blog, we will understand the GST that services attract.
Professional GST is the tax businesses and professionals pay on the services they offer. These professionals include CAs, architects, lawyers, consultants, IT professionals, digital marketers, designers, freelancers and more. GST is applicable to virtually all professional services offered in India. GST applies to all the following services:
GST law mandates you to register for GST and collect tax on your services in case you are a professional service provider. Your aggregate turnover during a financial year must be more than ₹20 lakh (₹10 lakh in case of special category states). This is why you must know GST consulting rates and service rates.
| State and UTs | Limit |
| Telangana | ₹20 lakh |
| Assam, Jammu & Kashmir, Ladakh | ₹10 lakh |
| Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, Uttarakhand | ₹10 lakh |
| Andhra Pradesh, Bihar, Chandigarh, Chhattisgarh, Dadra and Nagar Haveli and Daman and Diu, Delhi, Goa, Haryana, Himachal Pradesh, Gujarat, Karnataka, Jharkhand, Kerala, Madhya Pradesh, Lakshadweep, Maharashtra, Punjab, Rajasthan, Odisha, Tamil Nadu, Uttar Pradesh, West Bengal | ₹20 lakh |
Professional services are usually subject to the standard rate of GST of 18%. Nevertheless, there might be certain services that are charged at varying rates or exempted. This is why you must ensure that you are actually classified under the GST tariff of your service.
Whether it is GST on CA services or legal services, the tax rate is the same for all at 18%. The rate is applicable to services offered by professionals like consultants, lawyers, architects, and engineers, among other specialised service providers.
| Professional Service | GST Rate | Description |
| Legal Services | 18% | Legal advice, document preparation, court representation, and arbitration services. |
| Accounting & Auditing | 18% | Services by chartered accountants (CAs), company secretaries, and cost accountants, such as auditing and taxation services. |
| Consultancy Services | 18% | Management, business, engineering, architectural, software, and medical consultancy (non-doctor). |
| Medical Services | Exempt/18% | Educational services by recognised institutions are tax-free. Coaching and skill development in the private sector is taxed at 18%. |
| Educational Services | Exempt/18% | Educational services by recognised institutions are tax-free Coaching and skill development in the private sector is taxed at 18%. |
| Advertising Services | 18% | Any form of advertising and promotional services. |
| IT and Software Services | 18% | Software development, IT consultancy and other related services |
| Service Type | GST Applicability |
| General healthcare by doctors/hospitals | Exempt |
| Educational by recognised institutions | Exempt |
| Legal services by advocates to non-business entities under legal aid schemes | Exempt |
GST on legal services is subject to the Reverse Charge Mechanism (RCM). This implies that the responsibility of paying GST on legal services does not lie with the advocate or law firm offering the service, but with the beneficiary of these services. Legal services are subject to the GST rate of 18%. The recipient pays this tax under RCM.
When Does RCM Apply for GST on Legal Services?
Legal services are those that involve representation in court, tribunal or any legal consultancy offered by advocates or law firms. RCM is not applicable in case the recipient is a non-business entity or a small business with a turnover of less than ₹20 lakh, and the services may be exempt. You can claim the ITC in case the services are utilised in business.
ITC allows professional service providers to claim credit for the GST paid on inputs or services utilised to provide output services. For professional services, registered businesses can claim ITC on the GST paid in the course of using those services in their business. The recipient should ensure to claim ITC by making sure that:
ITC is, however, not applicable in case the services are used for exempt supplies or personal use. Some blocked credits are also applicable, like those involving motor vehicles, unless used for special purposes.
Here is how to apply for GST registration:
Here are some of the compliance requirements for professional service providers:
The professionals offering different services in India must adhere to the GST regulations to ensure smooth and legal business operations. It not only helps you avoid penalties but also helps you claim ITC to reduce the total tax liability. Proper records also help you get a business loan, as GST returns act as proof of income.
1. What sectors fall under professional services?
The key sectors are consulting, auditing, accounting, legal services, IT professional services, HR outsourcing, and financial advisory.
2. What is GST and its application in professional services?
GST (Goods and Services Tax) is one unified indirect tax levied on the supply of goods and services in India. It applies to professional services, such as legal, accounting and consultancy services at a standard rate of 18%.
3. Which professional services attract GST?
Legal advice, auditing, consultancy, accounting, IT services and architectural services are services that are usually subject to GST.
4. What is the GST rate of professional services?
Most professional services are subject to the standard GST rate of 18%, with an equal share of CGST and SGST levied on intra-state supplies or IGST levied on inter-state supplies.
5. When is GST registration mandatory for professional service providers?
Registration is mandatory for professional service providers when the aggregate turnover exceeds more than ₹20 lakh (₹10 lakh for the special category states).
6. What is the turnover requirement of GST registration in special category states?
Special category states such as Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura and Uttarakhand have a threshold of ₹10 lakh.
7. How does the reverse charge mechanism work for legal services?
In reverse charge, a recipient of the legal services (usually a business) pays the GST directly rather than the service provider under specific conditions.
8. Can professional service providers claim ITC?
Yes, registered professionals are entitled to claim ITC on GST paid on inputs and services that are used to provide taxable services.
9. What are the invoice requirements under GST for professional services?
According to Rule 46 of the CGST Rules, invoices should contain the following information: GSTIN, invoice number, description of services, SAC codes, GST rates, and place of supply.
10. How often must professionals file GST returns?
The monthly or quarterly returns are submitted by professionals in forms such as GSTR-1 and GSTR-3B, which summarise outward supplies and GST payments.
