Looking for expert help with GST and income tax for housekeeping contractors 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
- Housekeeping and cleaning contracts are taxed at 18% GST (SAC 998533, heading 9985, Notification 11/2017-Central Tax (Rate) S. No. 23(ii)). The September 2025 rate changes did not touch this entry.
- Pure services to a municipality or government department for a municipal or panchayat function are exempt (Notification 12/2017-Central Tax (Rate) S. No. 3 and 3A). Housekeeping inside schools up to higher secondary is exempt too (S. No. 66(b)).
- The 6% composition scheme stops you charging GST, so clients who claim credit lose 18%. Most B2B contractors stay on regular GST.
- Clients deduct 1% (individual or HUF) or 2% (firm or company) TDS on your bills. From 1 April 2026 that is Section 393(1) of the Income-tax Act 2025, which now names manpower supply as "work".
- Section 44AD deems 6% to 8% profit. If your real margin after wages and PF/ESI is lower, keep books instead.
What is the GST rate on housekeeping services in India? Housekeeping and general cleaning services are taxed at 18% GST: 9% CGST plus 9% SGST, or 18% IGST for an out-of-state client. The SAC is 998533, "general cleaning services". The rate entry is heading 9985, S. No. 23, item (ii) of Notification 11/2017-Central Tax (Rate). Exemptions apply to municipal-function work for government and to schools.
A housekeeping contract looks like one monthly bill. Behind it sit three tax questions that most small contractors answer by habit: which GST rate applies to this client, how much TDS the client will cut, and how much profit you declare when your margin is thin and wages are most of your cost. This guide covers GST as it stands after the 22 September 2025 rate changes, and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the matching sections of the Income-tax Act 2025 that apply from 1 April 2026.
Which GST rate applies to your housekeeping contract?
18% for almost every private client. Cleaning services sit under heading 9985, "support services", and serial number 23(ii) of Notification 11/2017-Central Tax (Rate) taxes support services other than tour operators at 9% CGST. Notification 15/2025-Central Tax (Rate), the services amendment effective 22 September 2025, changed serial numbers 3, 7 to 10, 12, 15, 21, 24, 26, 32, 34, 35 and 38, but not 23. None of the ten rate notifications issued in 2026 change it either.
The client decides the answer more than the work does:
Comparison
GST on Housekeeping Contracts by Client Type
| Client and work | SAC | GST | Source |
|---|---|---|---|
| Office, factory, hospital, mall or apartment complex: floor cleaning, washrooms, pantry, janitorial staff | 998533 | 18% | Notif 11/2017-CT(R), S. No. 23(ii) |
| Window and glass facade cleaning | 998532 | 18% | Notif 11/2017-CT(R), S. No. 23(ii); CBIC Explanatory Notes |
| Disinfection, fumigation and pest control | 998531 | 18% | Notif 11/2017-CT(R), S. No. 23(ii); CBIC Explanatory Notes |
| Municipal corporation or government department, pure service, for a municipal or panchayat function | 998533 | Exempt | Notif 12/2017-CT(R), S. No. 3 |
| Same, with consumables no more than 25% of the contract value | 998533 | Exempt | Notif 12/2017-CT(R), S. No. 3A |
| PSU, government company, board or authority (Governmental Authority or Government Entity) | 998533 | 18% | Words omitted from S. No. 3 and 3A by Notif 16/2021-CT(R), from 1 Jan 2022 |
| School from pre-school to higher secondary, cleaning performed in the school | 998533 | Exempt | Notif 12/2017-CT(R), S. No. 66(b) |
| Home cleaning booked through an app, when you are not liable to register | 998533 | App operator pays | CGST Act s.9(5); Notif 17/2017-CT(R) item (iii), inserted by 23/2017-CT(R) |
Source: Notifications 11/2017, 12/2017, 15/2025, 16/2021, 17/2017 and 23/2017-Central Tax (Rate); CBIC Explanatory Notes to the Scheme of Classification of Services
Two points catch contractors out on government work. The serial number 3 exemption needs a pure service, so a contract where you also supply machines and chemicals as a priced item has to pass the 25% goods test in serial number 3A instead. And the client must be a government or a local authority. A metro rail corporation, a state power company or a development authority is usually a Governmental Authority or Government Entity, and that wording was taken out of both entries from 1 January 2022. Bill those at 18%.
Housekeeping is a forward charge service, so you charge and pay the GST yourself. Security guard services work differently; see our GST on security services guide if you supply both.
Registration and the composition trap
You must register once aggregate turnover crosses Rs 20 lakh in a year (Rs 10 lakh in special category states) under Section 22 of the CGST Act. Exempt municipal or school billing counts towards that turnover, because aggregate turnover under Section 2(6) includes exempt supplies.
Composition looks tempting at 6% instead of 18%. Notification 2/2019-Central Tax (Rate) allows it at 3% CGST plus 3% SGST if last year's aggregate turnover was Rs 50 lakh or less, you make no inter-State outward supply, and you don't supply through an e-commerce operator that collects TCS under Section 52. The cost sits in condition 3: you "shall not collect any tax from the recipient" and get no input tax credit.
Say an IT company pays you Rs 1,00,000 a month. On regular GST, you bill Rs 1,18,000 and the client claims Rs 18,000 back as credit, so its real cost is Rs 1,00,000. On composition, you can't add tax, you pay Rs 6,000 out of the Rs 1,00,000, and the client gets nothing to claim. Most corporate tenders specify a GST-registered vendor issuing tax invoices for this reason. Composition works only when your clients are housing societies, small shops or households that can't use credit anyway.
Step-by-Step Guide
Setting the GST Treatment for a New Contract
1. Who is the client?
Central or State Government, a Union territory or a local authority: go to step 2. A school up to higher secondary: exempt under S. No. 66(b). Anyone else, including PSUs and government companies: 18%.
2. Is the work a municipal or panchayat function?
Check that the contract's work relates to a function entrusted to a Municipality under Article 243W or a Panchayat under Article 243G. If not, 18%.
3. Do you supply goods with the service?
No goods: exempt under S. No. 3. Goods no more than 25% of the contract value: exempt under S. No. 3A. Above 25%: 18%.
4. Write it into the invoice
Use SAC 998533 (or 998532 / 998531 for window cleaning or disinfection). For exempt work, note the notification and serial number on your bill and report the value as exempt in GSTR-1.
Source: Notification 12/2017-Central Tax (Rate), S. No. 3, 3A and 66(b), as amended by 16/2021-CT(R)
How much TDS will your clients deduct?
Housekeeping is contract work, so clients deduct 1% if you're a proprietor (individual or HUF) and 2% if you're a firm or company. Deduction starts once a single bill crosses Rs 30,000 or the year's total crosses Rs 1,00,000.
For payments up to 31 March 2026 this was Section 194C of the Income-tax Act 1961. From 1 April 2026 it is Section 393(1), Table Sl. No. 6(i) of the Income-tax Act 2025, at the same 1%/2% rates and the same Rs 30,000 / Rs 1,00,000 thresholds. Finance Act 2026 also inserted clause (f), "supply of manpower to a person to work under his supervision, control or direction", into the definition of "work" in Section 402(47), from 1 April 2026. So if you place cleaners on a client's site under the client's supervisor, that payment is now expressly contract work too.
Worked example. A Hyderabad contractor, run as a proprietorship, bills a private office Rs 1,20,000 for October 2026: six staff plus consumables. GST at 18% is Rs 21,600 (Rs 10,800 CGST and Rs 10,800 SGST), so the invoice total is Rs 1,41,600. The bill crosses Rs 30,000, so the client deducts 1% of the Rs 1,20,000 service value: Rs 1,200. Over twelve months that's Rs 14,400 of TDS credit, which shows in your Form 26AS and AIS only if the client files its TDS statement with your correct PAN. Check it every quarter, not at return time. Our TDS on contractor payments guide explains how payers file it.
Income tax: is 44AD right for a thin-margin business?
Section 44AD of the 1961 Act lets a resident individual, HUF or partnership firm (not an LLP) declare a deemed profit instead of keeping full books. It's 6% of turnover received through banking channels and 8% of the rest, if turnover is within Rs 2 crore, or Rs 3 crore where cash receipts are no more than 5% of the total. From tax year 2026-27, the same scheme is Section 58, Table Sl. No. 1 of the 2025 Act, with the "eligible assessee" definition in Section 58(11)(a).
The scheme is easy. It isn't always cheap for a housekeeping business, where wages, PF, ESI and uniforms eat most of every bill.
Comparison
FY 2025-26: Rs 1.8 Crore Turnover, All Receipts by Bank
| Section 44AD | Books and actual profit | |
|---|---|---|
| Profit declared | 6% of Rs 1,80,00,000 = Rs 10,80,000 | Actual margin of 4% = Rs 7,20,000 |
| Books of account | Not required | Required (Section 44AA) |
| Tax audit under 44AB(a) | Not required | Not required if cash receipts and cash payments are each no more than 5% (Rs 10 crore limit) |
| Catch | Rs 3,60,000 more profit taxed | If you used 44AD in any of the last five years, Section 44AD(4) and (5) apply: audit, and no 44AD for the next five years |
Source: Income-tax Act 1961, s.44AD(1), (4), (5), s.44AA, s.44AB(a) and (e); Income-tax Act 2025, s.58
The cash test is where housekeeping firms slip. Section 44AB(a) raises the audit limit from Rs 1 crore to Rs 10 crore only when cash receipts and cash payments are each no more than 5%. Pay your staff's wages in cash and the payments test fails, so a Rs 1.8 crore business needs an audit. Paying wages by bank transfer also gives you the record that EPF and ESI inspectors and your clients will ask for.
Once you're on books, keep each site as a cost centre. It shows which contracts lose money and supports the margin you declare.
Deadlines right now. If your FY 2025-26 accounts are audited, the return is due by 21 November 2026 (CBDT Circular 07/2026). If you missed 31 July or 31 August as a non-audit case, a belated return under Section 139(4) can still be filed until 31 December 2026.
Payroll: the part clients check before they pay
Corporate clients often ask for monthly EPF and ESI challans before they release a housekeeping bill. Two changes matter for 2026.
- EPF wage ceiling. From 17 September 2026 the statutory wage ceiling went up from Rs 15,000 to Rs 25,000 a month (S.O. 5109(E), as explained in EPFO's wage ceiling FAQs). Cleaners earning between Rs 15,000 and Rs 25,000 now come under mandatory coverage, with 12% employee contribution on wages up to Rs 25,000. Price new contracts with this cost in.
- ESI. The ESIC sets contributions at 0.75% for the employee and 3.25% for the employer on wages, for employees earning up to Rs 21,000 a month (Rs 25,000 for persons with disability). Employees with a daily average wage up to Rs 176 pay no employee share, but you still pay yours.
Our PF and ESI rates guide has the full contribution split. The payroll management service runs these filings every month.
Common mistakes housekeeping contractors make
- Treating every government client as exempt. PSUs, boards and government companies have been taxable at 18% since 1 January 2022. Read the client's constitution before you drop GST from a tender bid.
- Pricing a contract at 18% GST without the client's credit position. A housing society can't claim credit; an office can. The same Rs 1,00,000 bid lands very differently.
- Filing on 44AD out of habit. At a 3% to 4% real margin, the 6% deemed profit overstates income. Decide each year, keeping the five-year rule in Section 44AD(4) in mind.
- Paying wages in cash. It breaks the 5% payments test for the Rs 10 crore audit limit and weakens your EPF and ESI records.
- Ignoring TDS mismatches. Clients with many vendors often file under the wrong PAN or section. Reconcile Form 26AS and AIS every quarter.
How Tax Garden helps housekeeping and facility services firms
We set the GST treatment for each client contract, file your GST returns every month, and run payroll with EPF and ESI challans ready for client audits. At year end we compare 44AD with actual profit for your numbers and file the return that fits. If you also run pest control, our pest control and sanitation operators guide covers that side.
