GST on Services: Rates, Exemptions and Reverse Charge Explained

Unlike goods, most services in India are taxed at a flat 18% GST — but there are enough exceptions that assuming 18% by default causes real pricing and compliance errors.

Common Service Rate Slabs

• 18% — Most professional, consulting, IT, and B2B services (the default rate)
• 12% — Construction of affordable residential property, certain job-work services
• 5% — Transport services (goods transport agencies, without ITC), restaurant services (non-AC/takeaway categories)
• Nil/Exempt — Healthcare services, educational services, certain financial services

Reverse Charge Mechanism (RCM)

Under RCM, the recipient of a service pays GST directly to the government instead of the supplier collecting it — this applies to services like legal services from an advocate to a business, services from a Goods Transport Agency, and services received from an unregistered supplier in specified categories. If you're a business receiving such services, you're liable to self-invoice and pay tax under RCM even though your vendor never charged you GST.

Export of Services

Export of services is zero-rated (not exempt) provided payment is received in convertible foreign exchange and the recipient is located outside India — you can either export under a Letter of Undertaking (LUT) without paying IGST, or pay IGST and claim a refund. Most exporters prefer the LUT route since it avoids blocking working capital in a refund claim.