GST Rates – Services

Good news for MSMEs, small business owners, new entrepreneurs, and everyday consumers alike! The GST rates for services have been restructured from the earlier 4-tier system to a simpler 3-slab format. Following the 56th GST Council meeting held on 3rd and 4th September 2025, the revised GST framework will come into effect from 22nd September 2025.

Under the new structure, services will be taxed at 5% and 18% with a special 40% tax for sin goods and services(luxury items), offering significant benefits to consumers. The updated framework also brings improved ease of doing business—registration and return filing processes have been simplified, refunds are being processed faster, and compliance costs have been reduced. These changes are set to ease the regulatory load on businesses, particularly MSMEs and startups.

With these reforms, ranging from healthcare and education services to everyday necessities, the government has effectively rolled out a major Diwali gift for Indian consumers and businesses alike.

The Goods and Services Tax council has passed the rate slabs at NIL, 5%, 18%, 40%. Some of the services categorized under different slabs are mentioned below :

Tier – I  (5% Tax Slab) : Job work services (subject to input tax credit) Food delivery services (e.g., Zomato, Swiggy) Supply of Passenger transport by any motor vehicle where fuel cost is included Supply of transport of goods in containers by rail by any person other than Indian Supply of transportation of natural gas, petroleum crude, motor spirit, high speed diesel or ATF through pipeline Supply of Multimodal transport of goods within India Supply of Renting of any motor vehicle (with operator) designed to carry passengers where the cost of fuel is included in consideration Supply of Renting of goods carriage (with operator) where fuel cost is included in consideration insurance of “goods carriage” Supply of services by way of job work in relation to umbrella Supply of job work services or any treatment or process in Supply of job work in relation to bricks which attract GST at the rate of 5% Supply of job-work services in relation goods falling under Chapter 30 in the First Schedule to the Customs Tariff Supply of job-work services in relation to Hides, skins and leather Services by way of treatment of effluents by a Common Effluent Treatment Plant Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less. Beauty and physical well-being services Hotel stays upto 7,500

Tier – II (18% Tax Slab) :   Composite supply of works contract services involving predominantly earth work (that is constituting more than 75 percent of the value of the works contract) provided to Government Composite supply of works contract provided by a sub- contractor to the main contractor providing services at (i) above to Government Composite supply of works contract and associated services, in respect of offshore works contract relating to oil and gas exploration and production in offshore area Supply of Air transport of passengers in other than economy class Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both Support services to exploration, mining or drilling of petroleum crude or natural gas or both.

Tier – III (40% Tax Slab) : Luxury and sin services (e.g., premium event tickets, high-end entertainment) Entertainment events-amusement facility, water parks, films, theme parks, joy rides, merry-go-round, race course, go-carting, casinos, ballet, sporting events like IPL Race club services Gambling

• GST rate on works contract services: First of all one needs to understand whether works contract is a service or not. In GST, composite supply of works contract has been classified as a service.

  Accordingly, the rate of GST on services, in this case, would be as follows :

Under the revised GST framework, works contract services are generally taxed at 18%, irrespective of the value of goods supplied. This includes services related to construction, civil works, and infrastructure projects. Notably, the earlier distinction between contracts with less than 25% goods value (previously taxed at 12%) and those with more than 25% goods value (previously taxed at 18%) has been eliminated. All such contracts now uniformly attract an 18% GST rate.

However, certain projects may still qualify for concessional rates:

Affordable Housing Projects: Construction services for affordable housing projects (initiated on or after April 1, 2019) are taxed at a reduced rate of 1%, without the benefit of Input Tax Credit (ITC).

Government and Local Authority Contracts: Works contracts executed for government bodies or local authorities may be eligible for concessional rates, subject to specific conditions and notifications.

• GST rate on consultancy services : Consultancy services, covering sectors such as healthcare, finance, and investments, are now taxed at a concessional rate of 5% under GST without the benefit of input tax credit (ITC). Previously, these services were subject to an 18% GST with ITC. This revision is aimed at enhancing affordability and accessibility for consumers.

• Other GST slabs are 0%, 5%, 18% and 40%. These slabs are assigned on the basis of basic necessity and economic activity.

• GST rate on professional services :

  GST rate for services
  Services provided by legal professionals i.e. advocates – [Service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.]	18% Slab (Remain same)
  Services provided by chartered accountants, company secretaries and cost accountants [Services in nature of accounting, auditing, bookkeeping, tax return preparation and filing, consultancy and representational services.]
  Services provided by doctors and dentists [Services for appearance enhancement i.e. hair transplant, cosmetic and plastic surgeries are liable to be taxed and only these services are included and all other services provided by doctors and dentist are covered under health care services and are exempt from GST levy]
  Services provided by architects and interior decorators/ designers [ Services of nature Interior decoration/ design service]
  Services provided engineers
  Teachers [Profession includes vocation. So any services provided by private teachers/ tutors who conduct coaching classes or run coaching centers are covered under professional services and the services they render to students can be termed as education services liable to be taxed]
  Designers (fashion, industrial and specialty)
  Film artists

• GST rate on courier services : Courier services includes transportation, collection and delivery services. This includes letters , parcels etc movement form one or model of transportation.

  However GST on Postal services is excluded. GST on courier services is applicable as it falls under the definition of Supply.

  Below is the GST rate on courier services :

  Nature of Service	GST rates on services
  Courier Services	18% Slab

• GST rate for educational services : Though blindly any services provided by an educational institution is exempted from levy of taxes, there are certain services which when provided or consumed by educational institutions are liable to be taxed.

  Below is the GST rate for educational services which are taxable under GST :

  Nature of Service	GST rates on services
  Training services provided by commercial coaching entities	18% Slab(Remain same)
  Educational events organised by a foreign-based entity in India and the service recipient being commerce, industry or any other business or profession.

• GST rate for IT services

  Nature of Service	GST rates on services
  Information Technology Services : Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management. Business consulting services including pubic relations services Information technology (IT) consulting and support services Information technology (IT) design and development services Hosting and information technology (IT) infrastructure provisioning services IT infrastructure and network management services Other information technology services	18% Slab (Remain same)
  Internet Telecommunications Services : On-line text based information such as online books, newspapers, periodicals, directories etc On-line audio/ video content Other on-line contents
  Maintenance, Repair and Installation Services : Maintenance and repair services of office and accounting machinery/computers and peripherals/telecommunication equipment and apparatus. Installation services of office and accounting machinery and computers/ radio, television and communications equipment and apparatus.
  Other types of IT services : Research and development originals in computer-related sciences Telephone-based support services Other information services n.e.c.