Key Takeaways
- Beauty salon, parlour, spa, barber shop, and wellness services attract 5% GST without ITC from September 22, 2025 (reduced from 18%).
- The 5% rate is mandatory. Salon owners cannot opt for 18% with ITC under the current notification.
- GST registration is required only if annual turnover exceeds Rs 20 lakh (Rs 10 lakh in special category states).
- Products sold separately (shampoo, skincare, makeup) attract 18% or 28% GST as goods. Products used within a service (hair dye during colouring) are part of the service at 5%.
- Gym, fitness, and yoga services also attract 5% GST under the same revision.
- Salons below the registration threshold collect no GST and need not file any returns.
- Composition scheme under Section 10 of the CGST Act is available for salons with turnover up to Rs 50 lakh, allowing a flat 6% GST (3% CGST + 3% SGST) on services.
What is the GST rate on beauty salon and parlour services in India in 2026? From September 22, 2025, all beauty and well-being services (salons, parlours, barber shops, spas, gyms, fitness centers, yoga classes) attract 5% GST without Input Tax Credit. This rate was reduced from 18% by the 56th GST Council meeting as part of the GST 2.0 rate restructuring. The reduction applies to SAC codes 999721, 999722, and 999729.
The beauty and personal care industry is one of India's largest service sectors by establishment count, with lakhs of salons, parlours, and barber shops operating across the country. The September 2025 GST rate cut from 18% to 5% significantly changed the economics for salon owners. This guide covers the new rate, SAC codes, registration rules, the critical product vs service distinction, and how to handle GST billing correctly.
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The GST Rate Change: 18% to 5%
The 56th GST Council meeting recommended reducing GST on beauty and physical well-being services from 18% to 5%. This change was implemented via the GST 2.0 rate revision effective September 22, 2025.
Tax Rate Chart
GST on Salon and Beauty Services: Before vs After
Rate change effective September 22, 2025
Salon Services (Before Sept 22, 2025)
ITC was available
Salon Services (After Sept 22, 2025)
No ITC available
Gym/Fitness/Yoga (Before Sept 22, 2025)
ITC was available
Gym/Fitness/Yoga (After Sept 22, 2025)
No ITC available
Beauty Products (Standalone Sale)
Treated as goods, not services
Source: 56th GST Council Meeting; Notification No. 11/2017-CT(R) as amended by GST 2.0 rate revision
The ITC Trade-Off
Under the old 18% regime, salon owners could claim ITC on:
- Rent (18% GST)
- Equipment and furniture (18% or 28% GST)
- Professional products purchased from distributors (18% GST)
- Software and POS systems (18% GST)
Under the new 5% regime, none of this ITC is claimable. The 5% rate comes with a hard no-ITC condition.
For most small and medium salons, this is still beneficial because:
- The total tax paid drops from 18% to 5% (a 13-percentage-point reduction)
- ITC recovery was typically 3% to 5% of turnover (since the biggest costs, staff salaries and rental deposits, were either GST-exempt or blocked)
- The net effective tax reduction is 8% to 10% of service revenue
For high-end salons with expensive equipment, premium product lines, and high-rent locations, the loss of ITC may offset some of the rate reduction. But the 5% rate is mandatory; there is no option to choose 18% with ITC.
SAC Codes for Salon and Beauty Services
| SAC Code | Service Description | GST Rate | Examples |
|---|---|---|---|
| 999721 | Hairdressing and beauty treatment services | 5% | Hair cutting, styling, blow-dry, shaving, beard trimming, hair spa, facial, makeup |
| 999722 | Cosmetic treatment services, manicuring and pedicuring | 5% | Manicure, pedicure, nail art, cosmetic procedures (non-medical), waxing, threading |
| 999729 | Other beauty treatment services | 5% | Spa and massage therapy, body wraps, tattoo, body piercing, tanning |
| 999711 | Washing, cleaning and dyeing services | 5% | Laundry services within a spa/salon context |
| 999713 | Pressing services | 5% | If offered within a salon/spa package |
Gym, Fitness, and Yoga: Same Rate
Physical well-being services also moved from 18% to 5%:
| Service | SAC Code | GST Rate |
|---|---|---|
| Gym and fitness center membership | 999729 | 5% |
| Personal training sessions | 999729 | 5% |
| Yoga classes | 999729 | 5% |
| Swimming pool (commercial, not attached to residential society) | 999729 | 5% |
GST Registration Threshold for Salons
Who Must Register
GST registration is mandatory if the salon's aggregate turnover in a financial year exceeds:
| State Category | Threshold |
|---|---|
| Regular states (Maharashtra, Delhi, Karnataka, Tamil Nadu, etc.) | Rs 20 lakh |
| Special category states (Himachal Pradesh, Uttarakhand, all NE states, J&K, Ladakh) | Rs 10 lakh |
Aggregate turnover includes the total value of all taxable supplies, exempt supplies, exports, and inter-state supplies. It does not include GST collected.
Who Does NOT Need to Register
A neighbourhood barber shop earning Rs 8 lakh per year, or a home-based beautician earning Rs 12 lakh, is below the threshold and:
- Does not need a GSTIN
- Does not charge GST on services
- Does not file any GST returns
- Cannot issue tax invoices (can issue bills of supply)
Voluntary Registration
Salons below the threshold can voluntarily register for GST. This is typically done when:
- The salon has corporate clients who require a GSTIN on invoices
- The salon wants to appear in GST-verified business directories
- The salon plans to expand and wants to set up systems early
Caution: Once voluntarily registered, the salon must file GST returns (even nil returns) every month and cannot cancel registration for at least one year.
Product vs Service: The Critical Distinction
The most common GST compliance issue for salons is the treatment of products:
Products Used in Service Delivery (5% GST)
When a product is consumed as part of a service, the entire transaction is a composite supply under Section 2(30) of the CGST Act. The principal supply is the service, and the product is ancillary.
Examples:
- Hair dye used during a hair colouring session
- Shampoo and conditioner used during a haircut
- Wax strips used during a waxing service
- Facial cream used during a facial treatment
- Massage oil used during a body massage
The salon bills the customer for "hair colouring service" at 5% GST. The cost of the hair dye is embedded in the service price. There is no need to separately invoice the product.
Products Sold as Retail (18% or 28% GST)
When a salon sells products as standalone retail items (the customer takes the product home), this is a sale of goods, not a service.
| Product Category | HSN Code | GST Rate |
|---|---|---|
| Shampoo and conditioner | 3305 | 18% |
| Hair oil | 3305 | 18% |
| Skincare (moisturizer, cleanser, toner) | 3304 | 18% |
| Makeup (lipstick, foundation, eye shadow) | 3304 | 18% |
| Perfume and deodorant | 3303 | 18% |
| Sunscreen | 3304 | 18% |
| Hair colour (retail pack) | 3305 | 18% |
| Beauty soap | 3401 | 18% |
How to Handle Mixed Billing
A customer gets a haircut (service, 5% GST) and buys a bottle of shampoo (goods, 18% GST) in the same visit. The salon must:
- Invoice the service and product separately on the same or different invoices
- Apply 5% GST on the haircut (SAC 999721)
- Apply 18% GST on the shampoo (HSN 3305)
- Use the correct SAC/HSN codes for each line item
Do not bill the shampoo as part of the service at 5%. On audit, this will be reclassified as a sale of goods at 18%, with interest and penalty.
Composition Scheme for Salons
Small salons can opt for the Composition Scheme under Section 10 of the CGST Act:
Eligibility
- Turnover limit: Up to Rs 50 lakh in the preceding financial year
- Service providers: Can opt for composition (extended to service providers from April 2019)
- Rate: 6% on service turnover (3% CGST + 3% SGST)
Composition vs Regular: Which Is Better?
| Parameter | Composition Scheme | Regular (5% GST) |
|---|---|---|
| GST rate | 6% (3+3) | 5% (2.5+2.5) |
| Return filing | Quarterly (CMP-08) + annual (GSTR-4) | Monthly GSTR-3B + GSTR-1 |
| ITC claim | Not available | Not available (under 5% regime) |
| Inter-state supply | Not allowed | Allowed |
| E-commerce supply | Not allowed | Allowed |
| Invoice type | Bill of supply (cannot charge GST separately) | Tax invoice (GST shown separately) |
For most salons below Rs 50 lakh turnover, the regular 5% GST scheme is better than the 6% composition scheme because:
- The rate is lower (5% vs 6%)
- Neither scheme allows ITC
- The regular scheme allows listing on e-commerce platforms (Urban Company, etc.)
The only advantage of composition is simpler return filing (quarterly vs monthly). If the salon does not sell through e-commerce platforms and prefers minimal compliance, composition may be worth the extra 1%.
Common Compliance Mistakes
1. Billing Products at Service Rate
Selling retail products (shampoo, makeup, skincare) at 5% instead of 18%. This is the most common audit finding for salons. The GST department checks purchase invoices (products bought at 18%) against sales invoices (billed at 5%) and raises demand notices for the differential.
2. Not Separating Service and Product Revenue
Salons that maintain a single revenue line ("salon income") without distinguishing service revenue (5%) from product sales (18%/28%) will face classification issues on audit.
3. Claiming ITC Under the 5% Regime
Some salons continue to claim ITC on purchases after the September 2025 rate change. ITC claimed under the 5% regime will be reversed with interest on audit.
4. Missing Registration Threshold
A salon earning Rs 18 lakh from services and Rs 4 lakh from product sales has an aggregate turnover of Rs 22 lakh. This exceeds the Rs 20 lakh threshold. Product sales count toward aggregate turnover even if they are taxed at different rates.
5. Not Filing Nil Returns
Registered salons that have no revenue in a particular month must still file nil GSTR-3B and GSTR-1. Failure to file attracts a late fee of Rs 50 per day (Rs 20 per day for nil returns) up to a maximum of Rs 10,000 per return per tax period.
Salon Billing Example
Here is a sample GST invoice for a salon visit with both service and product components:
| Item | SAC/HSN | Taxable Value | GST Rate | GST Amount | Total |
|---|---|---|---|---|---|
| Haircut and styling | 999721 | Rs 500 | 5% | Rs 25 | Rs 525 |
| Hair colouring (includes dye) | 999721 | Rs 2,000 | 5% | Rs 100 | Rs 2,100 |
| Facial treatment | 999722 | Rs 1,500 | 5% | Rs 75 | Rs 1,575 |
| Shampoo (retail, 200ml) | 3305 | Rs 350 | 18% | Rs 63 | Rs 413 |
| Total | Rs 4,350 | Rs 263 | Rs 4,613 |
The hair colouring service includes the cost of hair dye. The dye is consumed during the service and is billed as part of the service at 5%. The retail shampoo is a separate sale of goods at 18%.
Key Notifications and References
| Reference | Description |
|---|---|
| 56th GST Council Meeting | Recommended reduction of GST on beauty and well-being services from 18% to 5% |
| Notification No. 11/2017-CT(R) (Heading 9997) | Lists beauty and physical well-being services under SAC 999721, 999722, 999729 |
| GST 2.0 rate revision (September 22, 2025) | Implementation of 5% rate without ITC for beauty services |
| Section 10, CGST Act 2017 | Composition Scheme eligibility and conditions |
| Section 2(30), CGST Act 2017 | Definition of composite supply |
| CBIC Circular on composite supply classification | Products consumed during service delivery are ancillary to the principal service supply |
This guide is based on the CGST Act 2017 (as amended), GST Council notifications, and CBIC circulars current as of August 2026. GST rates on services are subject to revision by the GST Council. The composition scheme threshold and conditions may change. Consult a Chartered Accountant for advice specific to your salon or beauty business.
