Professional fees are generally taxable under GST when the service provider crosses the prescribed registration threshold or is otherwise required to register.
In most cases, professional, technical, consultancy, accounting and business support services are covered under taxable service headings and attract 18% GST, usually charged as 9% CGST + 9% SGST for intra-State supply or 18% IGST for inter-State supply. CBIC’s services rate list places “legal and accounting services” and “other professional, technical and business services” under taxable service categories, with the standard rate generally reflected as 18%.
Table of Contents
GST On Professional Fees Under RCM
GST on professional fees is not automatically payable under Reverse Charge Mechanism merely because a company pays fees to a professional. RCM applies only in specified cases notified by the government.
The most important professional-fee-related RCM category is legal services. Under Notification No. 13/2017-Central Tax (Rate), GST on legal services supplied by an individual advocate, senior advocate or firm of advocates to a business entity is payable by the recipient under reverse charge.
Therefore, if a company pays fees to an advocate or law firm for legal services, the company generally pays GST under RCM. But if the payment is made to a CA, consultant, architect, engineer, marketing consultant or management consultant, RCM does not apply merely because professional fees are involved, unless the service falls under another notified RCM category.
GST On Professional Services By Individual
An individual professional is treated like any other supplier of services under GST. If the professional’s aggregate turnover exceeds the registration threshold, GST registration becomes mandatory and GST must be charged on taxable services.
For service providers, the general registration limit is ₹20 lakh aggregate turnover in a financial year, and ₹10 lakh in specified special category States. CBIC’s FAQ also explains that registration is linked with aggregate turnover on an all-India basis.
Thus, an individual CA, consultant, architect, engineer, designer, freelancer, legal consultant, technical expert or business advisor may be required to register and charge GST once the threshold is crossed.
How To Calculate GST On Professional Fees
GST is calculated on the taxable value of professional fees.
For example, if professional fees are ₹1,00,000 and GST rate is 18%, the invoice will be:
Professional fees: ₹1,00,000
GST @ 18%: ₹18,000
Total invoice value: ₹1,18,000
For intra-State supply, GST will normally be split as:
CGST @ 9%: ₹9,000
SGST @ 9%: ₹9,000
Total GST: ₹18,000
For inter-State supply, IGST will be charged:
IGST @ 18%: ₹18,000
If the transaction falls under RCM, the professional may not charge GST in the same way; instead, the recipient pays GST directly to the government under reverse charge, depending on the notified category.
GST On Professional Fees Paid To Unregistered Person
Professional fees paid to an unregistered person are not automatically taxable under RCM today. The earlier broad reverse charge provision on purchases from unregistered persons was not continued as a blanket rule. Therefore, merely paying professional fees to an unregistered consultant does not normally make the recipient liable under RCM.
However, the position changes if the service itself is specifically notified under RCM. For example, legal services by an advocate to a business entity may attract RCM even if the advocate is not charging GST in the invoice.
GST On Professional Fees Of Doctors
Health care services provided by a clinical establishment, authorised medical practitioner or paramedics are exempt from GST. Notification No. 12/2017-Central Tax (Rate) exempts health care services by clinical establishments, authorised medical practitioners and paramedics.
This means normal consultation fees charged by doctors for diagnosis, treatment or care are generally exempt from GST. However, cosmetic or non-health-care services may not get the exemption. Hospital room-related GST issues may also arise in specific cases, especially where room rent exceeds notified limits.
GST On Consultancy Services Limit
Consultancy services are taxable professional services. A consultant must generally register under GST when aggregate turnover from services exceeds ₹20 lakh in a financial year, or ₹10 lakh in specified special category States. Once registered, consultancy services are usually taxable at 18%, unless a specific exemption or special rate applies.
New GST Rate For Professional Services
There is no separate universal “new GST rate” for all professional services. The commonly applicable GST rate for most professional, technical and consultancy services remains 18%. Specific services may have different treatment because of exemptions or reverse charge provisions. For example, doctors’ health care services are exempt, while legal services to business entities may fall under RCM.
Conclusion
GST on professional fees depends on three factors: the nature of service, the registration status of the professional, and whether the service is covered under reverse charge. Most professional and consultancy services are taxable at 18% once the supplier is required to register. Doctors’ health care services are generally exempt. Legal services supplied by advocates to business entities are a key RCM category. Therefore, businesses should not apply GST mechanically on every professional payment; each payment must be tested against the rate notification, exemption notification and RCM notification.
