GST on Services: Rates, Rules & Place of Supply

While the taxation of physical goods depends on HSN classification and shipping locations, the service sector follows distinct tax rates and guidelines. Services account for over 50% of India's GDP, and their taxation under GST is highly structured. For service providers, determining whether to charge CGST+SGST or IGST requires identifying the "Place of Supply". This can be complex because services are intangible. In this guide, we discuss service tax slabs, the Place of Supply guidelines, and how exports are treated under GST.

GST Slabs for the Service Sector

Most services fall under the standard 18% slab, but the tax rates range from 5% to 28%:

• 5% GST: Low-cost hospitality (hotel rooms under ₹1,000), passenger transport (railway AC, flight economy, cabs), and print media advertising.
• 12% GST: Business class flight tickets, hotel rooms priced between ₹1,001 and ₹7,500, and construction services.
• 18% GST (Standard Rate): Professional services (consulting, legal, accounting), software development, telecom, banking, and dining out.
• 28% GST: Luxury hotel stays (room tariff above ₹7,500), gambling, casinos, and admission to entertainment events (like theme parks).

Determining the "Place of Supply"

To determine whether a transaction is Intra-state (CGST+SGST) or Inter-state (IGST), you must identify the location of the supplier and the Place of Supply. Under the Integrated GST (IGST) Act, the rules are:

• B2B Services: The Place of Supply is the location of the registered recipient.
• B2C Services: The Place of Supply is the address of the recipient on record. If the address is not available, the supplier's location is used.
• Immovable Property Services: Services related to real estate (like architecture or hotel lodging) are taxed based on the location of the property.

Export of Services: Zero-Rated Supply

The government encourages service exports. Exporting services to foreign clients is treated as a "Zero-Rated Supply". You do not charge GST to foreign buyers, provided you meet these conditions:

• The supplier is located in India and the recipient is outside India.
• The place of supply is outside India.
• Payment is received in convertible foreign exchange (or INR where permitted by RBI).
• The supplier and recipient are not merely branches of the same establishment.

Exporters can file returns under a Letter of Undertaking (LUT) without paying tax, or pay IGST and claim a refund. Use our calculator to check tax values for your service billing.