1. Introduction

If you run a salon, spa, or aesthetic clinic in India, the last few months have changed everything. For years, the sector operated under a uniform 18% GST rate with Input Tax Credit (ITC), making it easy to manage costs on rent, consumables, and high-value equipment.

But effective 22 September 2025, the GST Council reduced the GST rate on beauty and salon services to 5% without ITC.
Customers welcomed the reduced rate. Business owners did not.

The new regime removes ITC entirely, turning previously creditable costs—like rent, equipment, and consumables—into dead costs. Add the increased RCM liabilities, and the financial impact becomes significant.

This guide explains everything you must know about GST in 2025 for beauty, salon, and personal care services.

2. Nature of Service (As per GST Law)

All salon activities—hair services, facials, makeup, manicures, pedicures—are considered Supply of Services under GST.

However, salons often provide multiple types of supplies:

Pure Service

Haircut, facial, manicure, pedicure, massage
→ Taxed at 5% (No ITC)

Composite Supply

Example: Gold facial where gels and creams are used.
Principal supply = Service
→ Entire amount taxed at 5%

Mixed Supply

Example: Gift hamper with a shampoo + facial voucher at one price.
→ Taxed at the highest rate among the items (usually 18%)

Correct classification is essential to avoid litigation.

3. Relevant HSN/SAC Codes

Activity / Service	SAC / HSN	Remarks
Haircutting, styling, colouring	999721	Unisex salons
Facials, manicures, pedicures, nail art	999722	Skin and beauty treatments
Makeup, spa, steam bath, miscellaneous services	999729	Other personal care services
Retail products (shampoos, creams, serums, oils)	3305 / 3304	Must use HSN printed on product

Using the correct SAC/HSN ensures accurate GSTR-1 reporting.

4. GST Rates Applicable (Updated 2025)

Nature of Supply	GST Rate	Notes
Salon, grooming & beauty services	5%	Mandatory; No ITC allowed
Retail sale of products	18% / 12% / 5%	As per HSN
Commercial rent (RCM)	18%	If landlord is unregistered
Mixed supply bundles	Highest applicable rate	Usually 18%

You cannot choose to continue with 18% + ITC. The 5% rate is compulsory.

Relevant Notification:
Notification 12/2017-CT (Rate), amended in September 2025.

5. GST Exemptions

Salon services are taxable, but a few exemptions apply in medical cases:

Exempt

• Diagnosis or treatment of illness by a registered medical practitioner
• Reconstructive procedures due to:
  • Accidents
  • Burns
  • Congenital defects

Not Exempt

• Cosmetic surgery for beauty enhancement
• Hair transplants for aesthetics
• Salon facials, polishing, laser, slimming treatments

Example:
Reconstructive nose surgery → Exempt
Cosmetic nose enhancement → Taxable

6. Input Tax Credit (ITC) Rules

The 5% GST rate for beauty services comes with a complete ITC restriction.

Eligible ITC

None.
No ITC on inputs, input services, or capital goods used for providing salon services.

Ineligible / Dead Costs

• GST on commercial rent (18%)
• GST on equipment (laser, chairs, tools)
• GST on consumables (creams, serums, dyes)
• GST on interior work or renovation
• GST on training, marketing, consultancy

Retail Section (Special Rule)

If your salon sells products:

• ITC on retail stock is allowed
• You must:
  • Maintain separate inventory, OR
  • Use Rule 42 for proportionate reversal

This is a high-risk area for departmental objections.

7. Reverse Charge Mechanism (RCM)

The biggest trap for salons in 2025 is RCM.

Supplier Type	Service Type	RCM Applicable?	GST Rate
Unregistered landlord	Renting of commercial property	Yes	18%
Goods Transport Agency (GTA) charging 5%	Transport of stock	Yes	5%
Advocates / law firms	Legal services	Yes	18%

Major Impact

RCM paid = Pure cost, because ITC is blocked.

8. Place of Supply Rules

As per Section 12(4), IGST Act:

Rule:

Place of supply = Location where service is actually performed

Implications

• Client from another State → Still CGST + SGST
• Home services within the same State → Same State GST
• Bridal makeup in another State → IGST

Almost all salon services are intra-State.

9. Registration Requirements

You must register under GST if:

• Turnover exceeds ₹20 lakhs (₹10 lakhs for special category States)
• You sell beauty products inter-State
• You supply through e-commerce platforms like Urban Company
• You import OIDAR services (software subscriptions)

Composition Scheme is irrelevant for this sector after the rate cut.

10. Compliance Requirements

Mandatory

• Issue valid Tax Invoice
• Separate line items for 5% services and 18% products
• File:
  • GSTR-1
  • GSTR-3B
• Display GST Registration Certificate
• Maintain stock records for consumables vs retail products

Best Practices

• Update POS / salon management software
• Enable RCM alerts
• Train staff on correct SAC/HSN entries

11. Latest GST Updates for Salons (2024–2025)

• 22 September 2025: All beauty services shifted to 5% without ITC
• October 2024: RCM on commercial rent from unregistered landlords mandated
• 2025: GST authorities increasing audits for:
  • Wrong bundling of services
  • Under-reporting of retail sales
  • Incorrect SAC codes
• Composition scheme effectively obsolete (service rate now 5%)

12. Practical Issues & Common Mistakes

• Charging 5% on retail products instead of product HSN rate
• Forgetting to pay RCM on rent
• Misclassifying medical cosmetic treatments
• Continuing to use old 18% codes in billing software
• Reducing service prices without calculating increased backend costs
• Treating mixed supplies as composite supplies
• Not maintaining separate inventory for retail and internal use

13. Summary Table for Quick Reference

Topic	Summary
SAC Codes	999721, 999722, 999729
GST Rate on Services	5% (Mandatory, No ITC)
GST on Products	As per HSN (Mostly 18%)
ITC Availability	Not allowed for services
RCM on Rent	Applicable @ 18%
Compliance	GSTR-1, GSTR-3B

14. Conclusion

The shift to a 5% GST rate without ITC has fundamentally altered cost structures for salons and personal care service providers. While customers pay less tax, the loss of ITC on rent, consumables, and equipment means profit margins are under pressure.