GST for a hair salon in India: the 5% rate, the ₹20 lakh threshold and your bills

GST confuses hair salon owners in India for a simple reason: the rules changed in a big way in September 2025, and most of what you will read online still describes the old world. Until 21 September 2025, a registered salon charged 18% GST on a haircut and could claim back the tax on its colour stock. Since 22 September 2025, the rate on salon services is 5%, the input credit is gone, and the arithmetic of registration, voluntary or compulsory, looks completely different.

This guide goes through what actually matters at the front desk, with primary sources checked in October 2026: the current rate and the notification behind it, the ₹20 lakh registration threshold and where it drops to ₹10 lakh, whether registering voluntarily still makes any sense, what happened to the 6% composition scheme for services, whether your retail shelf changes anything, and what a bill from a registered salon must show. One thing to say plainly before the numbers start: this is practical guidance from ViteUneCoupe, a free booking tool for salons that never takes a commission, not tax advice. GST turns on your exact turnover, state and structure, so confirm your own situation with a chartered accountant. And if the salon is not even open yet, our step-by-step guide to opening a hair salon in India covers the setup side first.

What GST rate applies to hair salon services in 2026?

5%, without input tax credit, for every salon that is GST-registered. The 56th GST Council meeting of 3 September 2025 recommended cutting "beauty and physical well-being services" under services group 99972, salons and barbers explicitly included, from 18% with ITC to 5% without ITC, and set 22 September 2025 as the date the new service rates took effect (GST Council, press release of the 56th meeting, checked in October 2026). CBIC gave effect to the change through Notification No. 15/2025-Central Tax (Rate) dated 17 September 2025, which amends the services rate notification and conditions the 5% on not taking input tax credit (A2Z Taxcorp on the services rate notifications, checked in October 2026).

Two details matter more than the headline:

• The 5% is mandatory, not a choice. CBIC clarified that service providers in this category cannot elect to keep charging 18% with ITC: the 5% without ITC applies, full stop (Business Today, reporting CBIC's clarification, 16 September 2025, checked in October 2026).
• "Without ITC" means the GST on your purchases became a cost. A registered salon no longer claims back the 18% on its chairs, mirrors or fit-out. The tax you pay suppliers stays inside your cost base, which is exactly why the Council could cut the client-facing rate so far.

For clients, the change is visible and pleasant: a ₹1,000 colour that carried ₹180 of GST before 22 September 2025 now carries ₹50. For owners, it rewrote the registration question, which is the rest of this article.

The more important point first, though: the 5% only concerns registered salons. A salon below the registration threshold charges no GST at all, on anything, and that describes most independent salons in the country.

The ₹20 lakh threshold: must your salon register?

Registration becomes compulsory when your aggregate turnover crosses ₹20 lakh in a financial year, the standard threshold for service providers, unchanged since GST began (ClearTax, GST registration threshold limits, checked in October 2026). In the special category states of Manipur, Mizoram, Nagaland and Tripura the threshold is ₹10 lakh; the other north-eastern and hill states were allowed to opt for higher limits and did, so do not assume ₹10 lakh applies just because a state is labelled "special category", check your own state (Taxguru, threshold limits for registration under GST, checked in October 2026).

Aggregate turnover is a wide net. It is the total of everything supplied under the same PAN, across all branches in India: cuts, colours and treatments, plus retail product sales, plus any other business you run as the same person or firm. A sole proprietor who freelances on the side adds that income to the salon's takings for the test.

Put ₹20 lakh in salon terms: about ₹1.67 lakh of takings a month, every month. A solo stylist or a small two-chair salon in a smaller city may genuinely stay under it; a busy multi-stylist salon in a metro with strong colour business will cross it without noticing. That is the trap: GST does not send a reminder when you cross the line. You are expected to apply for registration within 30 days of becoming liable, and operating past the threshold without registering exposes you to back taxes, interest and penalties. If your monthly takings are anywhere near ₹1.5 lakh, add the running total up now rather than at year end, and talk to a CA before the line, not after.

A few situations force registration regardless of turnover, such as making inter-state taxable supplies of goods or certain e-commerce arrangements. A classic walk-in hair salon rarely triggers them, but if your setup is unusual, that is a CA question, not a blog question.

Below ₹20 lakh: is voluntary registration still worth it?

Before 22 September 2025 there was a real, if narrow, case for a small salon to register voluntarily: you charged clients 18% but you also reclaimed 18% on stock, equipment and a big fit-out. The September 2025 change deleted that case almost entirely, because the 5% salon rate comes with no input tax credit. Register voluntarily today and you get the costs of registration with virtually none of the old benefit:

• You must add 5% GST to services for clients who cannot claim it back, against unregistered competitors who add nothing, or absorb that 5% out of your margin.
• You take on the full compliance cycle: GST-compliant invoicing, periodic returns, reconciliations, usually an accountant's monthly fee that can exceed the tax itself for a small salon.
• You still cannot claim back the GST on your colour stock or renovation, because the rate you now fall under forbids it.

The honest reading for a typical independent salon comfortably under ₹20 lakh: staying unregistered keeps your prices sharper and your paperwork lighter, and since September 2025 there is very little on the other side of the scale. The residual reasons to volunteer are commercial rather than fiscal, for instance corporate clients who insist on GST invoices. Model it with your CA before electing, and remember the rule that cuts both ways: an unregistered salon must never charge or show GST on a bill. The CGST Act itself says only a registered person may collect the tax (section 32, CGST Act 2017, on India Code, checked in October 2026), so this is a legal line, not an admin slip.

The 6% composition scheme for services: mostly history for salons

Since April 2019, small service providers, salons named among the typical examples, could opt for a composition-style scheme under Notification No. 2/2019-Central Tax (Rate): a flat 6% on turnover (3% CGST + 3% SGST), available up to ₹50 lakh of annual turnover, with no input tax credit and almost no invoice formality (GST Council, Notification 2/2019-Central Tax (Rate), checked in October 2026). A composition taxpayer cannot collect the tax from clients: the 6% comes out of the salon's own pocket, and every bill must be a bill of supply carrying the words "composition taxable person, not eligible to collect tax on supplies" (CAclubindia, when six per cent composition costs more than it saves, checked in October 2026).

The scheme still exists as of October 2026, but run the comparison for a salon and it is hard to see why a new registrant would choose it. The regular regime now costs 5%, which you are allowed to collect from the client; composition costs 6%, which you are not. Both deny input tax credit, so the old consolation of composition, simplicity in exchange for lost credits, no longer buys anything the regular 5% does not. Composition keeps a lighter return calendar, and we have not found an official clarification spelling out how the GST Council expects the 6% scheme and the new 5% rate to coexist for this sector, so treat the choice, and any switch out of an existing composition registration, as a question for your CA with the current notifications in front of them. What is clear is the direction: for hair salons, the September 2025 rate cut removed most of the composition scheme's reason to exist.

Does selling shampoo and products change anything?

Two things, and only one of them is about tax rates.

First, your retail sales count toward the ₹20 lakh test. Aggregate turnover adds services and goods together, so a salon doing ₹18 lakh in services and ₹3 lakh in product sales is over the threshold even though neither line is on its own. The higher ₹40 lakh threshold that exists for pure goods traders does not apply to you: supply any services at all and the ₹20 lakh services threshold governs.

Second, once registered, products carry their own rates, separate from the 5% on services. The same September 2025 reform moved everyday items like hair oil and shampoo from 18% to 5%, while other beauty preparations stayed at the standard 18% (GST Council, press release of the 56th meeting, checked in October 2026). A registered salon therefore bills a colour service at 5% and the retail products at whatever rate each product carries, on the same invoice if need be. If your retail shelf is a serious business line, have your CA map your product list to the current rate schedule once rather than guessing per sale.

Invoices: what a registered salon's bill must show

If your salon is not registered, this section is short: your bill is an ordinary receipt with no GST number, no GST line and no GST wording, ever.

If your salon is registered under the regular scheme, you issue a tax invoice. For walk-in clients the recipient details are minimal, but the invoice itself must carry your salon's name, address and GSTIN, a consecutive serial number and date, a description of the service with its SAC code, the taxable value, and the tax shown split as CGST and SGST (2.5% + 2.5% for salon services supplied within your state). Two conveniences soften the counter work: for a supply under ₹200 to an unregistered client who does not ask for an invoice, you may skip the individual invoice and issue one consolidated tax invoice at the end of the day covering all such sales (Taxbuddy, GST invoice format and rules, checked in October 2026). Most salon tickets are above ₹200, so in practice you will be issuing a bill per visit, which any GST billing software or even a printed invoice book handles.

On the client's side, the bill from a registered salon simply shows the service price plus 5% GST, or a GST-inclusive price with the tax amount broken out. Unlike packaged goods with their MRP rules, there is no special price display regime for services on your wall menu, but what you advertise and what the bill totals should obviously agree: a ₹1,000 price list entry that becomes ₹1,050 at the till is a conversation you want to have on the menu, not at the counter.

A composition salon, as covered above, issues a bill of supply instead, with the mandatory wording and no tax line.

Where a booking system fits, and where it does not

Worth separating cleanly, because salon software vendors in India often bundle GST billing into the pitch. A till or billing module produces tax invoices; a booking system fills the chairs those invoices get written for. ViteUneCoupe sits entirely on the second side, and for full transparency, the India-relevant limits first: it does no GST invoicing or billing at all, no POS, no UPI or payment processing, so your tax invoices come from your billing tool or invoice book, not from us. Reminders are email only, with no SMS or WhatsApp on any plan. Fittingly for an article about tax lines, the currency ones: the paid plan is charged in euros, an import of services your CA may have views on at reconciliation time, and the booking page's price badge is a € today, which keeps the detailed ₹ rate card on your printed menu or in the free-text service descriptions rather than in the badge.

What it does do touches GST only indirectly: a written record of how busy the salon actually is. The ₹20 lakh test is a rolling awareness problem; salon revenue arrives ₹300 and ₹1,500 at a time, and nobody feels a threshold approaching unless something keeps score. A calendar of every booked appointment and each client's visit history is a far better starting point for that conversation with your CA than a year-end reconstruction from a paper diary, even though the turnover arithmetic itself stays in your billing records. The free plan covers unlimited online bookings with 0% commission, always, plus your calendar, service catalogue, staff schedules and client database; the Standard plan at 29 € excluding tax per month adds the confirmation, reminder and thank-you emails and calendar sync. For how that stacks up against the Indian suites that do bundle GST billing, our comparison of hair salon booking software in India goes through the options one by one, and our honest breakdown of what salon software really costs in India covers the price side, currency effects included.

The bottom line for a typical independent Indian salon in October 2026: under ₹20 lakh, no GST to charge and none to show on a bill; over it, 5% on services with no input credit, a tax invoice per visit, and a composition scheme that is now rarely worth a look. Verify your own numbers with a chartered accountant, because thresholds, state rules and notifications move, and this article will not know your turnover.

Frequently asked questions

Do hair salons charge GST in India?

Only GST-registered ones. Registration is compulsory once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in Manipur, Mizoram, Nagaland and Tripura), and most independent salons sit below that. An unregistered salon charges no GST and must not show any GST on its bills.

What is the GST rate on salon services in India?

5% without input tax credit, effective 22 September 2025, down from 18% with ITC. The change came from the 56th GST Council meeting and was notified by CBIC; it is mandatory, so a registered salon cannot opt to keep charging 18% with credit.

What does "5% without ITC" mean for my salon?

You charge clients 5% GST on services, but you can no longer claim back the GST paid on your purchases: colour stock, equipment, fit-out. The tax on inputs becomes part of your costs. Clients pay less; the salon's own purchase costs are the trade-off.

Should a small salon register for GST voluntarily?

Since the September 2025 change, usually not. The old benefit of voluntary registration was reclaiming input tax, and the 5% salon rate forbids that. Registering now mainly means charging 5% to clients who cannot claim it back, plus a compliance workload. The main residual reason is corporate clients who require GST invoices; run it past your CA.

Is the 6% composition scheme still useful for salons?

Rarely. The scheme under Notification 2/2019 still exists for service providers up to ₹50 lakh, but it costs 6% that you cannot collect from clients, while the regular regime costs 5% that you can, and both deny input credit. How the two regimes are meant to interact after the rate cut has not, to our knowledge, been clarified officially, so take the decision with a chartered accountant.

Do retail product sales count toward the ₹20 lakh threshold?

Yes. Aggregate turnover adds services and goods under the same PAN, so product sales push you toward the threshold alongside haircuts. Once registered, each product is billed at its own GST rate, which since September 2025 is 5% for items like shampoo and hair oil and 18% for some other beauty preparations.