Yes, 18% GST is generally applicable on professional fees (e.g., CA, lawyer, consultant, architect) in India. It is mandatory to register and collect GST if your annual turnover exceeds ₹20 lakh (₹10 lakh for special category states). Certain services like healthcare or education may be exempt, while others like legal services may fall under the Reverse Charge Mechanism (RCM).
Professional fees attract GST in India at a rate of 18%. Professionals must register under GST if their annual turnover exceeds ₹20 lakh.
9983 SAC Code: Professional, technical & business services.
The GST on consultancy services in India is 18% for most professional services.
Register through the GST Portal: Use the GST portal to register, file returns, and pay GST. Claim Input Tax Credit (ITC): Professionals who are eligible are allowed to claim ITC on GST paid on business-related purchases and services, which reduces the total tax liability.
Types of Professional Services Subject to GST
This includes services provided by legal professionals, financial consultants (excluding input-taxed financial supplies), architects and engineers, marketing and business consultants, and IT specialists. However, not all services are treated equally.
Whether consultants have to charge GST depends on various factors, including the nature of the services provided and the income threshold. Generally, if your annual sales exceed $30,000, you are required to register for GST/HST. However, specific services might be exempt from GST/HST.
RCM mechanism is not applicable to all professional services, but only to specific situations notified by the government: Legal Services: When a lawyer or law firm provides services to a GST-registered business, the business, and not the lawyer, is required to pay GST under RCM.
If you make $75,000 or more in business income, you're required to register for and charge GST (we'll cover this in a sec). This means that you charge an additional 10% on top of your regular fees, which you record and pay to the government when you lodge your next Business Activity Statement (BAS).
But persons who are engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax or an agriculturist, to the extent of supply of produce out of cultivation of land are not liable to register under GST.
Any person or business providing services with an aggregate annual turnover of more than ₹20 lakhs must obtain GST registration.
The GST/HST break includes certain qualifying goods, such as:
You can claim tax relief on: professional membership fees, if you must pay the fees to be able to do your job. annual subscriptions you pay to approved professional bodies or learned societies if being a member of that body or society is relevant to your job.
Professional fees typically fall under "Operating Expenses." Categorizing these fees correctly on your company's income statement can reduce taxable income and lower overall tax liability. Consulting a tax professional ensures proper categorization and maximizes tax deductions or credits.
The following individuals are exempted to pay Professional Tax: Parents of children with permanent disability or mental disability. Members of the forces as defined in the Army Act, 1950, the Air Force Act, 1950 and the Navy Act, 1957 including members of auxiliary forces or reservists, serving in the state.
Professional services are usually taxed at 18% under GST. For intra-state supplies, this is separated into 9% CGST and 9% SGST. An 18% IGST is applicable for interstate supply. A GST-registered professional can claim input tax credit (ITC) on business expenses and must charge GST on client invoices.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
Note: RCM is not applicable to, - ➢ A Department or Establishment of the CG, SG or UT; or ➢ Local authority; or Governmental agencies, Who have taken registration under CGST only for deducting tax u/s 51 and not for making a taxable supply. ➢ A registered person paying tax under section 10 of the said Act.
Assess your level of experience and expertise
For example, a consultant with 10 years of industry experience can justify charging $150 to $300 per hour, while someone just starting might set fees between $50 and $100. Consider any specialized training or unique qualifications that add value.
Management fees are considered taxable services for GST/HST and QST purposes. Management fees paid to shareholders, other residents of Canada, and non-residents are all separately reportable on schedules that support the T2 Corporate income tax return.
Common Examples of GST Exempt Transactions:
Financial services – Most banking services, interest payments, and insurance premiums. Residential rent – Rental income from residential properties. Donated goods and services – Items or services that are given away without payment.
Consultant fees typically fall under the category of professional fees. Professional fees are classified as operating expenses or general and administrative expenses. These are costs associated with the day-to-day operations and management of a business.
Yes, if you are a GST/HST registrant, you must charge GST/HST on both fees and expenses, including travel allowances. The fact that you receive an advance for the expenses does not exonerate you from the obligation of invoicing for the expenses and charging GST/HST. Please read the terms of payment carefully.
Example: Healthcare services, educational services, and public utility services (e.g., water supply) are exempt from GST. This exemption is unconditional, meaning the supply is fully exempt from GST without any terms or conditions attached.