GST on Consulting & Professional Services: Rate, ITC, RCM & Export Guide

Consulting and professional services in India attract GST at the rate of 18% (9% CGST + 9% SGST for intra-state, or 18% IGST for inter-state supplies). This rate applies broadly under SAC (Services Accounting Code) 9983 — Other Professional, Technical and Business Services — which covers management consulting, IT consulting, strategy consulting, HR consulting, financial consulting, engineering consulting, environmental consulting, market research, and similar advisory services. SAC 9982 covers legal and accounting/bookkeeping services, also at 18%. The 18% rate applies regardless of whether the consultant is an individual professional, a partnership firm, a private limited company, or an LLP. There is no concessional rate or exemption for general consulting services. Specific government-notified exemptions exist for services provided to government bodies or international organisations, but these require specific conditions to be met. For most private sector consulting engagements — between two businesses, or between a business and an individual — 18% GST applies and the recipient (if registered) can claim full ITC on the consulting fee paid, provided it is used for a business purpose and is not blocked under Section 17(5) of the CGST Act.

For service providers including consultants, the GST registration threshold is ₹20 lakh per financial year for most states (₹10 lakh for special category states — Manipur, Mizoram, Nagaland, Tripura). Once aggregate turnover from all services and goods exceeds this threshold in a financial year, GST registration becomes mandatory under Section 22 of the CGST Act. There is no option for a grace period — registration must be obtained within 30 days of crossing the threshold. Important caveats: if a consultant makes any inter-state supply of services (e.g., provides consulting to a client in another state), GST registration is compulsory regardless of turnover under Section 24 of the CGST Act. Similarly, if a consultant is providing services through an e-commerce platform (such as online consulting marketplaces), registration is mandatory from the first rupee of supply. Composition Scheme is available for service providers (Section 10(2A)) up to ₹50 lakh turnover at a 6% flat rate (3% CGST + 3% SGST), but composition dealers cannot issue tax invoices, cannot charge GST from clients, cannot claim ITC, and cannot make inter-state supplies — making it unsuitable for most consultants with cross-state or export clients.

Yes. Input Tax Credit (ITC) on consulting fees paid to an external consultant is fully eligible under Section 16 of the CGST Act, provided the conditions for ITC are met. The four conditions for claiming ITC are: (1) You must possess a valid tax invoice from the consultant showing GST charged. (2) You must have actually received the services. (3) The tax charged by the consultant must have been deposited to the government (verifiable via GSTR-2B). (4) You must have filed your own GST return (GSTR-3B). Consulting is not a blocked credit under Section 17(5) of the CGST Act — the blocked credit list covers personal expenses (motor vehicles for personal use, food & beverages, club memberships, health insurance, etc.) and does not include general business consulting, management advisory, IT consulting, legal advice, or financial advisory services. Therefore, businesses routinely recover 18% GST paid on consulting fees as ITC, effectively making the net cost of consulting 82.2% of the invoice value (100% fee minus 18% ITC recovered). One caution: if the consulting is for a purpose unrelated to business (personal advice, non-business strategy) or for activities resulting in exempt or non-business supplies, proportionate ITC reversal may be required under Rule 42 of the CGST Rules.

When an unregistered foreign consultant (NRI or foreign company) provides consulting or professional services to a registered Indian recipient, the transaction falls under the Reverse Charge Mechanism (RCM) under Entry 1 of Notification No. 10/2017-IGST. Under RCM, the liability to pay GST shifts from the supplier to the recipient — the Indian company must pay 18% IGST on the value of consulting services received from the foreign consultant. Here is how it works in practice: The Indian company receives the consulting invoice from the foreign consultant (without any GST, since the foreign consultant is outside Indian GST jurisdiction). The Indian company calculates 18% IGST on the value and pays it directly to the government through Form GSTR-3B (Table 3.1(d) — Inward supplies attracting reverse charge). The Indian company can then claim ITC of this 18% IGST paid under RCM in the same return, subject to normal ITC conditions. Net effect: tax is self-assessed, paid, and recovered as ITC in the same month — zero net tax cost for the Indian business. However, if the Indian recipient is exempt or unregistered, it cannot claim ITC and the RCM tax becomes an actual cost. All such transactions must be reported in GSTR-1 Table 4B and GSTR-3B Table 3.1(d).

Under GST, the time of supply determines when GST becomes payable. For services, the time of supply is the earliest of: (a) date of invoice (if invoice is issued within 30 days of service completion), (b) date of receipt of payment, or (c) date of completion of service — per Section 13 of the CGST Act. Therefore, when a consultant receives an advance payment from a client before rendering the consulting service, GST becomes payable at the time of receiving the advance. The correct procedure is: (1) On receipt of advance, issue a Receipt Voucher (not a tax invoice) to the client — this is mandatory under Rule 50 of CGST Rules. The Receipt Voucher must mention the GSTIN, the advance amount, the applicable GST rate (18% for consulting), and a description of the services to be provided. (2) Pay the GST on advance in that month's GSTR-3B. (3) When the actual service is provided and the final invoice is raised, issue the tax invoice adjusting the advance already received. (4) The client can claim ITC only after receiving the final tax invoice (not on the receipt voucher). For GST-registered clients paying advance for consulting, the advance GST treatment means cash flow planning matters — the consultant collects and remits GST even before service delivery, but this is offset by the client's future ITC claim.