For a service business, GST works on the same principles as for a trader or manufacturer, but the details bite in different places. There is no stock to track and no e-way bill. In their place come questions of timing, retainers, advances, clients in other states and clients abroad.
01Registration
You must register once your aggregate turnover crosses ₹20 lakh in a financial year, or ₹10 lakh if you operate from Manipur, Mizoram, Nagaland or Tripura. The higher ₹40 lakh limit is only for businesses supplying goods alone.
Aggregate turnover counts all services, including exempt services and exports, across India on your PAN. A Pune freelance developer with ₹22 lakh of fees, all from US clients, must register.
Unlike goods, inter-state services do not force registration below the limit. A Jaipur photographer who shoots one wedding in Delhi a year does not have to register for that alone.
02Rates and SAC codes
Most business services carry 18% GST: consulting, accounting, legal services to businesses, IT services, advertising, repair and maintenance, as of October 2026. Some have other rates or exemptions, such as healthcare by clinical establishments and education by schools, which are exempt, and transport of goods, which has its own options.
Services are classified by SAC, the Services Accounting Code, which starts with 99. Use the right code on each invoice, because the rate and some special rules depend on it. An Ahmedabad CA firm uses 998221 for audit and 998231 for tax consultancy.
03When to invoice and pay tax
The 30-day rule
An invoice for services must be issued within 30 days of completing the service, under rule 47 of the CGST Rules. Banks, insurers and NBFCs have 45 days.
Tax is due at the time of supply, which is the earlier of:
- the invoice date, if the invoice is issued within those 30 days, or
- the date you receive payment.
If the invoice is late, the time of supply becomes the date the service was completed, or the payment date if earlier.
Retainers and continuing services
Monthly retainers, annual maintenance contracts and similar arrangements are continuous supplies of services. Under section 31(5) of the CGST Act, the invoice is issued:
- on or before the due date of payment, where the contract fixes one,
- on or before receipt of payment, where it does not,
- on or before completing an event, where payment is linked to it.
An Ahmedabad CA firm on a monthly retainer of ₹25,000 with a manufacturing client issues an invoice on the 1st of each month, when the fee falls due: ₹25,000 plus CGST ₹2,250 and SGST ₹2,250.
Advances
Advances for services carry GST in the month they are received. Issue a receipt voucher and adjust the tax when the invoice follows. See the GST on advances guide.
04Place of supply
For most services to a registered client, the place of supply is where the client is registered. For services to an unregistered client, it is the client's address on record. Several services have their own rules, such as those related to property, events and training.
| Service | Client | Place of supply | Tax |
|---|---|---|---|
| Audit by an Ahmedabad CA firm | Registered company in Mumbai | Maharashtra | IGST |
| Interior design by an Ahmedabad studio | Gujarat company, office in Mumbai | Maharashtra, where the property is | IGST |
| Corporate training by a Bengaluru trainer | Registered company in Chennai | Tamil Nadu | IGST |
| AC repair by a Surat service centre | Household in Surat | Gujarat | CGST and SGST |
The place of supply guide covers the special rules.
05Clients abroad
Services to clients outside India are exports if all five conditions in section 2(6) of the IGST Act are met, including that payment is received in convertible foreign exchange, or in rupees where RBI allows. Exports are zero-rated: under a Letter of Undertaking you charge no IGST and can claim a refund of unused input tax credit.
Payment must arrive within one year of the invoice, or the IGST becomes payable with interest. See the export guide.
06Input tax credit for service firms
Service firms often have fewer inputs than traders, but the credit still matters: office rent from a registered landlord, software, computers, telephone, professional fees and contract staff. The usual conditions apply, including that the invoice is in your GSTR-2B and that you pay the supplier within 180 days. Staff food, gifts and personal travel are blocked.
07Reverse charge on what you buy
Some services you buy carry GST under reverse charge, which you pay yourself: legal fees from an advocate, director fees, sponsorship, some security services and rent from unregistered landlords for commercial property. Firms that pay advocates often miss this.
08The composition option for services
A service business with turnover up to ₹50 lakh in the previous year can choose to pay 6% of turnover, 3% CGST and 3% SGST, in place of regular GST. It issues bills of supply, cannot claim input tax credit, and cannot make inter-state supplies. This suits a local tutor or a small repair shop whose clients are households, and rarely suits a consultant whose clients are businesses that want credit.
09For larger firms
A Pune IT services company with offices in three states registers in each state where it has an office from which it supplies. Each GSTIN invoices its own clients, and shared services such as head office software are passed to branches through an Input Service Distributor registration, so credit reaches the GSTIN that uses it.
This guide is general information as of October 2026 and does not amount to tax advice.
In MatruOS, a service invoice carries the SAC, the tax split by state and a number from your series, and advances are recorded with a receipt voucher.