Looking for expert help with GST and income tax for AC repair and service centres India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- AC and refrigerator repair, servicing and AMCs are 18% GST under heading 9987 (Notification 11/2017-Central Tax (Rate), S. No. 25, 9% CGST). New ACs and almost every spare part are also 18% (Notification 9/2025-Central Tax (Rate), Schedule II).
- SAC 998715 covers household appliances, 998717 commercial cooling equipment and compressors, and 995463 AC installation with pipe and duct work.
- An AMC paid upfront is taxed when you receive the money or issue the invoice, whichever comes first (Section 13(2), CGST Act), not month by month.
- Free warranty repairs done for a brand carry no GST to the customer; your bill to the brand does (Circular 195/07/2023-GST).
- Service centres don't get the Rs 40 lakh goods-only registration limit. The Rs 20 lakh limit applies, and the 6% service composition scheme is open up to Rs 50 lakh.
What is the GST rate on AC repair and service? AC repair, gas charging, servicing and annual maintenance contracts are taxed at 18% GST: 9% CGST plus 9% SGST, or 18% IGST. The entry is heading 9987 (maintenance, repair and installation services) at serial number 25 of Notification 11/2017-Central Tax (Rate). The SAC is 998715 for household ACs and refrigerators and 998717 for commercial cooling equipment.
Summer brings a rush of gas top-ups and split-AC installations. The rest of the year runs on office AMCs, cold-room breakdown calls and warranty jobs for a brand. Each type of work raises a different GST question: which SAC to use, when an advance AMC is taxed, whether a free warranty visit needs an invoice. On the income tax side, a business client's TDS often doesn't match what you've booked. This guide covers the GST rules in force since 22 September 2025, and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the matching Income-tax Act 2025 sections that apply from 1 April 2026.
What GST rate and SAC code apply to AC repair work?
18% on the service, and 18% on nearly every part you fit. The SAC tells the officer what kind of work it was, so pick the one that matches the equipment.
Comparison
GST on AC and Refrigeration Work and Parts (from 22 September 2025)
| What you bill | Code | GST | Source |
|---|---|---|---|
| Repair and servicing of home ACs, refrigerators, freezers | SAC 998715 | 18% | Notif 11/2017-CT(R), S. No. 25 (heading 9987); CBIC Explanatory Notes |
| Repair of cold rooms, chillers, commercial AC plants, compressors | SAC 998717 | 18% | Notif 11/2017-CT(R), S. No. 25; CBIC Explanatory Notes |
| AC installation in homes, offices, shops with pipe and duct work | SAC 995463 | 18% | Notif 11/2017-CT(R), S. No. 3, item (xii) (heading 9954) |
| Air conditioners (window, split, ducted) | HSN 8415 | 18% | Notif 9/2025-CT(R), Sch II, S. No. 404 |
| Refrigerators, freezers, deep freezers | HSN 8418 | 18% | Sch II, S. No. 407 |
| Compressors and fans | HSN 8414 | 18% | Sch II, S. No. 401 |
| Copper tubes and copper fittings | HSN 7411, 7412 | 18% | Sch II, S. No. 316, 317 |
| Valves, stabilisers, control panels | HSN 8481, 8504, 8537 | 18% | Sch II, S. No. 466, 477, 509 |
Source: Notification 11/2017-Central Tax (Rate) as amended by 15/2025-CT(R); Notification 9/2025-Central Tax (Rate), Schedule II (9% CGST + 9% SGST); CBIC Explanatory Notes to the Scheme of Classification of Services
Notice the split in the installation line. CBIC's notes place "installation services of ventilation, refrigeration or air-conditioning equipment for dwellings, computer centres, offices and shops, including related pipe work, duct work and sheet metal services" under SAC 995463, a construction code. Pure repair and maintenance stays in 9987. Both are 18%, so the rate doesn't change, but use the right SAC on each invoice line.
Refrigerant gas cylinders, insulation and fasteners can sit under other headings. Check the HSN and rate on your supplier's invoice before you copy it onto yours. Our HSN and SAC code guide explains how many digits your invoices need.
AC sold with installation on one bill
When you sell an AC and fit it on the same bill, the installation is part of a composite supply. Section 8(a) of the CGST Act taxes a composite supply at the rate of its principal supply, here the AC, so 18%.
Example: a customer buys a 1.5-ton split AC from you for Rs 40,000, plus installation at Rs 1,500 and 3 metres of extra copper piping at Rs 2,400.
- Taxable value: Rs 40,000 + Rs 1,500 + Rs 2,400 = Rs 43,900.
- GST at 18%: Rs 7,902 (Rs 3,951 CGST + Rs 3,951 SGST).
- Invoice total: Rs 51,802.
Repair bills with parts and labour
CBIC Circular 47/21/2018-GST (S. No. 2) dealt with car servicing, where spare parts and labour appear on one bill. It said that where the values of goods and services are shown separately, each is taxed at its own rate. The same reading works for AC repair. Since your parts and labour are both usually 18%, the total doesn't change; but showing them separately keeps your stock records clean and lets a business client deduct TDS correctly.
Does your AC service centre need GST registration?
Most AC businesses mix parts sales with labour, so the Rs 40 lakh limit for goods suppliers usually isn't available.
Step-by-Step Guide
Which GST Registration Limit Applies to an AC Service Business?
Do you earn service income?
Repair, servicing, gas charging, installation and AMCs are all services. If any of your income is from services, you are not an exclusive supplier of goods.
Any service income: Rs 20 lakh
Section 22 of the CGST Act. Aggregate turnover counts parts sales and service income together. Some special category states have Rs 10 lakh.
Goods only: Rs 40 lakh, but not everywhere
Notification 10/2019-Central Tax gives Rs 40 lakh only for exclusive supply of goods, and not in Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura or Uttarakhand.
Business clients will ask for a GSTIN
Offices, hotels and hospitals that pay you under AMCs want a tax invoice so they can claim input tax credit. Many register for that reason alone.
Source: Section 22, CGST Act 2017; Notification 10/2019-Central Tax, dated 7 Mar 2019
Example: a Hyderabad AC service centre earns Rs 14 lakh from repairs and AMCs and sells Rs 9 lakh of parts and stabilisers in a year.
- It has service income, so the Rs 20 lakh limit applies (and Telangana never had Rs 40 lakh anyway).
- Aggregate turnover: Rs 14,00,000 + Rs 9,00,000 = Rs 23,00,000, so it must register.
Our GST registration service handles the application, and our turnover limit guide explains how aggregate turnover is counted.
Is the 6% composition scheme a good idea?
The 1% composition scheme for traders under Section 10(1) lets you supply services only up to 10% of last year's turnover or Rs 5 lakh, whichever is higher. A service centre is usually far above that.
The option built for service providers is Section 10(2A), read with Notification 2/2019-Central Tax (Rate). You can opt in if:
- your aggregate turnover in the previous financial year was Rs 50 lakh or less;
- you aren't eligible for the Section 10(1) scheme;
- you make no inter-State outward supplies, no exempt supplies and no supplies through an e-commerce operator that collects tax at source.
You pay 3% CGST on turnover plus the same under SGST, so 6% in all. In return you can't charge GST to customers, you issue a bill of supply headed "taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies", and you get no input tax credit.
Example: turnover this year is Rs 40 lakh, all to households in one state.
- Composition tax: 6% x Rs 40,00,000 = Rs 2,40,000, paid from your own margin.
- Under regular GST you'd charge 18% to customers and claim credit on parts, the van's servicing and your tools.
If most of your clients are offices and hotels that want input tax credit, composition costs you work. If you mostly serve homes in your own city, it can simplify things. Our composition scheme guide covers the conditions in full.
AMCs, warranty jobs and when GST is due
Annual maintenance contracts. Under Section 13(2)(a) of the CGST Act, GST on a service is due on the date of the invoice (if issued on time) or the date you receive payment, whichever is earlier. Rule 47 of the CGST Rules gives you 30 days from the supply of service to issue the invoice.
Example: a hospital pays you Rs 1,20,000 on 1 April for a 12-month AMC on 40 split ACs.
- GST: 18% x Rs 1,20,000 = Rs 21,600 (Rs 10,800 CGST + Rs 10,800 SGST).
- All Rs 21,600 is due in the return for April, or the April-June quarter if you file quarterly, even though the visits run until next March.
- If the hospital pays Rs 10,000 a month instead, GST follows each payment or invoice: Rs 1,800 a month.
Book upfront AMC money as a liability for GST from the day it reaches your bank. It's one of the most common reasons a service centre's GSTR-3B falls short of its bank statement.
Warranty jobs for a brand. CBIC Circular 195/07/2023-GST covers parts and repairs given free during warranty.
Comparison
Warranty Repairs: Who Pays GST?
| Situation | GST treatment | Circular 195/07/2023-GST |
|---|---|---|
| You repair or replace under warranty on the brand's behalf, customer pays nothing | No GST on the visit to the customer | S. No. 3 |
| You bill the brand for the part or the labour on a tax invoice | GST on your bill to the brand; the brand can take credit | S. No. 4(a) |
| Customer pays something extra (a gas top-up, an upgrade, a visit charge) | GST on that extra amount | S. No. 1 and 3 |
| No ITC reversal by the distributor or service partner on parts it replaced and billed to the brand | Keep your credit | S. No. 4(a) |
Source: CBIC Circular 195/07/2023-GST, dated 17 Jul 2023
Keep the job card, the brand's claim number and your invoice to the brand together. When a GST officer compares parts bought against parts sold, these show where the free-to-customer parts went.
Income tax for AC repair and service businesses
Section 44AD works for this trade. AC repair and servicing is a business. It isn't one of the professions in Section 44AA(1) (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration or other notified professions), which Section 44AD(6)(i) shuts out. A resident individual, HUF or partnership firm (not an LLP) with turnover within Rs 2 crore, or Rs 3 crore if cash receipts are within 5%, can declare 6% of bank and UPI receipts and 8% of the rest as profit. From 1 April 2026 the same rule sits in Section 58 of the Income-tax Act 2025. If you only design HVAC systems for a fee, that may count as technical consultancy; take advice before using 44AD.
Example (proprietor, new tax regime, FY 2025-26): receipts of Rs 90,00,000, of which Rs 10,00,000 came in cash. Cash is 11.1% of receipts, so the Rs 2 crore limit applies.
- 6% of Rs 80,00,000 = Rs 4,80,000.
- 8% of Rs 10,00,000 = Rs 80,000.
- Deemed profit: Rs 5,60,000. Tax on Rs 4-5.6 lakh at 5% = Rs 8,000, fully covered by the Section 87A rebate, so tax payable is nil.
Tax Rate Chart
New Tax Regime Slabs, FY 2025-26 (AY 2026-27)
Up to Rs 4 lakh
Rs 4-8 lakh
Rs 8-12 lakh
Rs 12-16 lakh
Rs 16-20 lakh
Rs 20-24 lakh
Above Rs 24 lakh
Source: Section 115BAC(1A), Income-tax Act 1961, as amended by Finance Act 2025
If you declare less than the presumptive profit after using 44AD, Section 44AD(4) can bar you from it for five years, and Section 44AD(5) then needs books and a tax audit once income crosses the basic exemption limit. Our Section 44AD guide explains both.
TDS from business clients. When a company, firm or other liable payer deducts TDS on your bill as payment for contract work, the rate is 1% if you're an individual or HUF and 2% otherwise. It applies when a single bill exceeds Rs 30,000 or the year's total exceeds Rs 1,00,000 (Section 194C of the 1961 Act; Section 393(1), Table Sl. No. 6(i) of the 2025 Act from 1 April 2026). On the hospital AMC above, a proprietor would see Rs 1,200 deducted (1% of Rs 1,20,000). Whichever section the payer uses, match each deduction in your Form 26AS or AIS before filing. Our TDS on contractor payments guide explains the payer's side.
Cash and deadlines. Section 269ST (Section 186 of the 2025 Act) bars receiving Rs 2 lakh or more in cash from one person in a day or for one transaction; a Rs 2,40,000 cash payment for a multi-unit installation breaches it, and the penalty equals the amount (Section 271DA). See our cash transaction limits guide. Presumptive-basis businesses pay all advance tax by 15 March (Section 211; Section 408(2) of the 2025 Act). If you missed the original AY 2026-27 due date, a belated return can still be filed by 31 December 2026 (Section 139(4)), with a late fee of Rs 5,000, or Rs 1,000 if total income is within Rs 5 lakh (Section 234F).
Common mistakes AC service centres make
- Paying GST on AMCs month by month when the client paid upfront. Section 13(2) makes the whole amount taxable when the money arrives or the invoice is issued.
- Claiming the Rs 40 lakh limit. Any repair or AMC income means Rs 20 lakh, and Telangana has no Rs 40 lakh limit at all.
- Using the 1% trader composition rate. A service-heavy business usually fails the 10% or Rs 5 lakh test in Section 10(1). The service option is 6% under Section 10(2A).
- Billing customers GST on free warranty visits. Circular 195/07/2023-GST says no GST is payable where the customer is charged nothing. Bill the brand instead, if your agreement provides for it.
- Ignoring TDS credit. The deductions show in Form 26AS and AIS; claim them in your return.
How Tax Garden helps AC and refrigeration businesses
We check whether you need to register, compare regular GST with the 6% composition option for your mix of homes and business clients, and file your GST returns with AMC advances taxed in the right month. At year end we match client TDS to your books and file through our ITR filing service, on 44AD or on books kept by our accounting and bookkeeping service. If you also sell TVs and appliances, our electronics shop guide covers those lines, and our guide for electricians and plumbers covers wiring work. Cold-room owners can see our cold storage guide.
