GST for Salons in India: Rates, Registration, Invoices and Mistakes to Avoid

On 22 September 2025, GST on salon services fell from 18% to 5%, and the right to claim input tax credit went with it. This guide covers what that changes in your prices, bills and returns, with worked numbers.

The rules are as they stood on 31 October 2026. This is not tax advice: confirm anything that affects your filing with your CA.

#What is the GST rate on salon services?

Salon services in India are taxed at 5% GST without input tax credit (ITC) from 22 September 2025: 2.5% CGST plus 2.5% SGST. The 56th GST Council recommended it, and Notification 15/2025-Central Tax (Rate) applies it to "beauty and physical well-being services" in group 99972: hairdressing and barbers, beauty treatments, manicure and pedicure, spas and fitness centres.

The 5% is not optional. The notification calls it a mandatory rate, and CBIC's FAQ of 16 September 2025 confirms that a salon cannot choose to charge 18% and claim credit instead.

#What does "5% without ITC" change for your salon?

It means the GST you pay on what you use to deliver services is now a cost. The GST on rent, backbar products, equipment and software used to come back as credit against the 18% you charged. Now it stays with you, and three things follow:

1. Your costs went up even though your rate came down. Price every service from costs that include GST. Our guide to pricing salon services shows how.
2. Credit on shared costs must be split. CBIC's FAQ says credit on inputs used only for services can't be taken. Credit on inputs used for both services and retail must be reversed in proportion, treating the 5% services as if they were exempt (section 17(2) of the CGST Act and the ITC rules).
3. Retail stock is different. Products you buy only to resell are used for a taxable sale of goods, so the GST on them can still be claimed.

What to tell clients who expected a bigger cut

Clients who read "salon GST cut to 5%" expect bills about 11% lower (₹1,050 instead of ₹1,180). If you repriced to protect your margin, their bill fell about 6%. Say so plainly, once, without a lecture on input tax credit.

Splitting credit on shared costs

Say the GST on your shared costs (rent, software, the CA's fee) is ₹18,000 this month, with service sales of ₹9,00,000 and retail of ₹1,00,000 before GST. Services are 90% of turnover, so about ₹16,200 of that credit is blocked and about ₹1,800 can be claimed. The rules add more steps and a yearly true-up, so let your CA run the formula.

Stock you held on 22 September 2025

A product sold on or after 22 September 2025 carries the new rate even if you bought it earlier (GST Council FAQ). Credit already taken on backbar stock and equipment bought before the change, and used for services after it, is a grey area: ask your CA whether any needs reversing.

Rent from a landlord who isn't registered

If you are registered and your landlord isn't, you pay 18% GST on the rent yourself under reverse charge, a rule in force since 10 October 2024. With no credit on services, that 18% is now mostly a cost: ₹10,800 a month on a ₹60,000 rent. Composition taxpayers were taken out of this reverse charge from 16 January 2025 (Notification 07/2025-Central Tax (Rate)), which matters in the composition section below.

#When does a salon need GST registration?

You must register once your aggregate turnover in a financial year crosses ₹20 lakh, or ₹10 lakh if you supply from Manipur, Mizoram, Nagaland or Tripura. Apply within 30 days of crossing the limit.

Three details catch salon owners out:

• The ₹40 lakh limit isn't yours. It applies only to businesses that sell goods and nothing else. A salon that sells services, or services and products, uses the ₹20 lakh limit on its whole turnover.
• Turnover is counted per PAN, across India. Every outlet under the same PAN counts together, before GST.
• Below the limit, you can't charge GST. An unregistered salon must not collect GST or show it on bills (section 32 of the CGST Act).

Should you register before you have to?

Usually not. Below ₹20 lakh, registering adds 5% to every bill and gives you nothing back, because a salon gets no credit on its inputs anyway. The two good reasons to register early are that you will cross the limit within the year, or that a large client insists on a tax invoice.

If you find you crossed the limit months ago, register straight away. Tax is still owed on the sales made after you became liable, with interest, and you can't go back to clients for it. The sooner you stop the clock, the smaller that bill.

One more trap: splitting one salon's billing across family members' names to stay under ₹20 lakh. If it is one business in substance, with one counter, one staff and one signboard, expect it to be treated as one.

#Should a salon choose the composition scheme?

For most salons, no. The composition scheme for service providers taxes you at 6% of turnover (3% CGST + 3% SGST), and you can't collect that tax from clients. On the regular scheme you add 5% to the bill. Neither gets credit on services any more, so composition usually costs more than it saves.

The main conditions: turnover up to ₹50 lakh in the previous financial year, no supplies to other states, and a bill of supply with no GST shown instead of a tax invoice. The one case worth running numbers on is high rent paid to an unregistered landlord, because a regular salon pays 18% reverse charge on it and a composition salon doesn't.

At these rates, composition wins on tax only when rent paid to an unregistered landlord exceeds about 6.9% of what clients pay you. Then weigh what you give up: tax invoices for corporate clients, credit on retail stock, and bridal work in other states, which counts as an inter-state supply a composition salon can't make. The option also lapses on the day your turnover for the year crosses ₹50 lakh (section 10(3) of the CGST Act). From that day you must issue tax invoices, show GST on every bill and file regular returns, and for a growing salon that switch tends to land in the middle of the wedding season.

#Which SAC code should a salon use?

Salon services fall under heading 9997, group 99972, and all four codes in the group carry the same 5% rate. India's codes follow the UN's product classification, whose notes suggest this split:

How many digits you print depends on last year's turnover. Up to ₹5 crore, a 4-digit code (9997) is required on invoices to registered clients and optional on bills to walk-in clients. Above ₹5 crore, use 6 digits. Printing the full 6-digit code on every bill costs nothing and keeps the HSN summary in your GSTR-1 tidy.

#What must a salon's GST invoice show?

A tax invoice must carry the particulars listed in Rule 46 of the CGST Rules. For a salon, that means:

Beauty services are taxed where they are performed (section 12(4) of the IGST Act), so a visitor from another state still gets CGST and SGST on a haircut in your salon, while bridal make-up you do at a wedding in another state gets an IGST bill. For bills under ₹200 to unregistered clients who don't want an invoice, you may issue one consolidated invoice at the end of each day instead (section 31(3)(b) and Rule 46).

#Should salon prices include GST?

Either works, as long as your menu says which. Exclusive pricing ("₹500 + GST") keeps menu figures equal to revenue; inclusive pricing gives clients a round final figure. Arguments start when the menu says ₹500 and the bill says ₹525.

• Exclusive: GST = price × 5%. Bill = price × 1.05.
• Inclusive: taxable value = price × 100 ÷ 105. GST = price × 5 ÷ 105, about 4.76% of the price.

Which to choose depends on who your clients are. A walk-in parlour where most bills are paid in cash does better with inclusive round figures: nobody wants ₹628.95 counted out in change. A salon whose clients compare menus online can price before GST, as long as the menu says "+ 5% GST" next to the prices, not in a footnote. Whichever you pick, put the same basis on the menu, the rate card on WhatsApp and your booking page, because a client who sees two different figures assumes the higher one is a trick.

#What GST rate applies to products you sell?

Retail products are taxed at their own HSN rate, not at the 5% service rate. GST 2.0 cut several personal-care items from 18% to 5% from 22 September 2025; many others were left out.

• Backbar products aren't sold separately. The shampoo used in a hair wash is part of the service at 5%, and its GST is your cost.
• A product sold to the client is its own line at its own rate, even on the same bill as a service.
• Bundles need a decision. If a package mixes products and services at one price, ask your CA whether it is a composite supply (taxed at the main service's rate) or a mixed supply (taxed at the highest rate in it).
• Check every SKU. Take the HSN code from your supplier's invoice and set the rate product by product. One "products at 18%" setting overcharges clients on shampoo and hair oil.
• Old stock at the old rate leaves extra credit. Shampoo bought at 18% and sold at 5% after the cut leaves more credit than tax on that sale. The CBIC FAQ says it isn't refundable as an inverted duty, because the goods are the same, but it stays in your credit ledger and can be set off against later GST. Ask your CA to confirm how it applies to your stock.

#How is GST charged on packages, memberships, advances and gift vouchers?

GST on a service is due at the earlier of the invoice date or the date you receive payment (section 13 of the CGST Act). So money taken in advance for services is taxed when it comes in, not when the services are used. Gift vouchers are the exception.

Gift vouchers follow CBIC Circular 243/37/2024-GST of 31 December 2024: a voucher is neither goods nor a service, so selling one isn't a supply. GST is charged on whatever it pays for, at that item's rate, when it is redeemed, and vouchers that expire unused (breakage) aren't taxed. A wallet balance spendable on any service behaves much like a voucher; a top-up tied to named services behaves like an advance.

Cancellations need one more decision. If a bride cancels and you keep the advance under your contract, the GST you paid on it stays paid. If you refund part of a package or advance, issue a credit note for the refunded value so the tax on it comes back; credit notes for a financial year have to be issued by 30 November after it ends (section 34 of the CGST Act). Pricing and selling packages is covered in salon memberships and packages, and bridal deposits in bridal makeup packages.

#How do discounts and coupons work on a GST bill?

Take the discount off first, then charge GST on what's left. A discount given at the time of sale and shown on the invoice is not part of the taxable value (section 15(3) of the CGST Act).

• Complimentary services carry no GST because nothing is charged. Record them anyway, for stock and commission.
• Money from a third party (a brand or a bank offer) that pays part of the price is still part of the taxable value.
• Reward points: decide with your CA whether redeemed points are a discount or a payment, and treat them the same way on every bill.

#Which GST returns does a salon file?

Most registered salons file two returns: GSTR-1 for sales and GSTR-3B for the summary and payment. If your turnover is up to ₹5 crore, you can choose QRMP, which means quarterly returns with monthly tax payments.

Two rules changed in 2025: the tax liability in GSTR-3B now comes from your GSTR-1 and can't be edited there (fix mistakes through GSTR-1A first), and a return can't be filed more than three years after its due date.

#The GST mistakes salons make most often

The last two are about control as much as tax: see our guides to daily cash closing and staff commission structures. Reading your P&L shows where GST now sits among your costs.