GST on Chartered Accountants, CS, and Lawyers – SAC Codes & Rate Chart
While Chartered Accountants (CAs), Company Secretaries (CSs), and Lawyers are masters of navigating complex financial and legal regulations for their clients, they too must comply with the specific tax laws governing their own professional services. The introduction of the Goods and Services Tax (GST) has streamlined many aspects of indirect taxation, but it has also created specific compliance requirements for these professionals. Understanding the framework of GST for chartered accountants, company secretaries, and legal professionals is crucial for ensuring seamless financial compliance and avoiding potential penalties. Many professionals and the businesses that hire them often face confusion regarding the correct SAC codes, applicable GST rates, and special provisions like the Reverse Charge Mechanism. This guide from TaxRobo aims to demystify these rules, providing a clear and comprehensive overview of GST obligations, invoicing standards, and compliance for India’s leading professional service providers.
GST for Professional Services: The Fundamentals
The Goods and Services Tax (GST) is a destination-based, comprehensive tax levied on the ‘supply’ of goods or services. For professionals like CAs, CSs, and Lawyers, the expertise, advice, and representation they provide are classified as a ‘supply of services’. Therefore, these services fall squarely under the purview of GST, making it essential for practitioners to understand its core mechanics. Grasping these fundamentals is the first step towards perfect compliance and efficient financial management for any professional practice in India. It involves understanding not just the tax rates but also the mechanism of how tax is charged based on the location of the provider and the recipient, which determines the type of GST levied on the invoice.
How GST Applies to CAs, CSs, and Lawyers
Under the GST regime, any professional service rendered in exchange for a fee is considered a ‘supply of services.’ This includes a wide array of activities such as auditing by a CA, compliance services by a CS, or legal representation by a lawyer. The tax itself is structured into three main components to accommodate India’s federal system. The application of these components depends entirely on whether the transaction is within the same state (intra-state) or across different states (inter-state). Adhering to the correct chartered accountant GST guidelines India is not just about charging the right rate but also about applying the right type of tax.
- Intra-State Supply: When the service provider and the service recipient are located in the same state, both Central GST (CGST) and State GST (SGST) are levied. For example, if a Chartered Accountant in Mumbai provides auditing services to a client also based in Mumbai, the invoice will show a charge for CGST and SGST, with the total tax revenue being shared between the Central and Maharashtra governments.
- Inter-State Supply: When the service provider and the service recipient are in different states, Integrated GST (IGST) is levied. For instance, if a Company Secretary in Delhi offers incorporation services to a startup in Bengaluru, the invoice will carry a single IGST charge, which is collected by the Central Government.
GST Registration Threshold for Professionals
GST registration is not mandatory for every professional from day one. The government has set a threshold based on annual turnover to keep small service providers out of the immediate compliance net. For professionals providing services, the threshold for mandatory GST registration is an aggregate annual turnover of ₹20 lakhs. This limit is reduced to ₹10 lakhs for special category states in North-East India. “Aggregate turnover” is a comprehensive term that includes the total value of all taxable supplies, exempt supplies, exports, and inter-state supplies under the same PAN. Once a professional’s turnover crosses this limit in a financial year, they must register for GST. The process for GST application for chartered accountants India and other professionals is standardized on the official GST Portal, where they can apply for their unique GST Identification Number (GSTIN).
The Definitive SAC Code & GST Rate Chart for Professionals
One of the most critical aspects of GST compliance for service providers is the correct classification of their services. The GST framework uses a specific coding system to identify each type of service, which ensures uniformity in taxation and reporting. For services, this is known as the Services Accounting Code (SAC). Using the right SAC code is non-negotiable for accurate invoicing, correct tax payment, and seamless filing of GST returns. This section provides a clear and definitive chart to help CAs, CSs, and Lawyers identify the correct codes and applicable GST rates for their services, eliminating any confusion.
What are SAC Codes and Why Are They Important?
SAC, or Services Accounting Code, is a classification system developed by the service tax department for identifying each type of service. Under the GST regime, this system has been adopted to classify services for levying tax. Every service provided by a professional has a unique SAC code. This code is essential for a business to mention in its GST invoices and in the GSTR-1 returns filed. The primary importance of SAC codes lies in ensuring that the correct GST rate is applied to the service provided. Using the correct SAC codes for professionals India is a key part of GST compliance, as it helps the government accurately track revenue from different service sectors and ensures that businesses are paying the appropriate amount of tax. An incorrect SAC code can lead to tax discrepancies, notices from the tax department, and potential penalties.
SAC Codes and GST Rates for CAs, CSs, and Lawyers
Thankfully, the GST Council has simplified the rates for most professional services. The majority of services offered by Chartered Accountants, Company Secretaries, and Lawyers fall under a single GST rate of 18%. This standardization simplifies calculations and reduces complexity for both the service provider and the recipient. Understanding the specific SAC codes GST rates India is crucial for generating compliant invoices. For instance, while both accounting and secretarial services are taxed at 18%, they have distinct SAC codes that must be mentioned correctly. The same applies to the diverse GST rates for CS India, which, although uniformly 18%, require specific classification.
Here is a clear table outlining the common services, their corresponding SAC codes, and the standard GST rate:
| Professional Service Category | Common Services Included | SAC Code | GST Rate |
|---|---|---|---|
| Legal Services | Legal advisory, representation, documentation, arbitration. | 99821 | 18% (Note: Often subject to Reverse Charge Mechanism) |
| Accounting & Auditing Services | Bookkeeping, statutory audits, tax audits, accounting review. | 99822 | 18% |
| Tax Consultancy Services | Tax planning, advisory, GST/Income Tax return filing. | 99822 | 18% |
| Company Secretary Services | Secretarial audits, compliance services, incorporation, corporate governance. | 99823 | 18% |
GST Compliance and Invoicing: A Practical Guide
Understanding the theoretical aspects of GST, such as rates and SAC codes, is only half the battle. The real test of compliance lies in its practical application—day-to-day invoicing, filing returns, and managing special provisions like the Reverse Charge Mechanism. For CAs, CSs, and Lawyers, maintaining meticulous records and adhering to invoicing protocols is not just a legal requirement but also a reflection of their professional diligence. This section provides a practical walkthrough of the key compliance activities that every professional must manage to stay on the right side of the law and ensure a smooth GST journey for their practice.
Creating a GST-Compliant Invoice
A GST-compliant tax invoice is the primary document that establishes the tax liability for any transaction. It is not just a bill for services rendered; it is a legal document that contains crucial information required for the recipient to claim Input Tax Credit (ITC). For professionals, issuing a correct and complete invoice is mandatory for every taxable supply of service.
Here is a checklist of the mandatory fields for a professional service invoice under GST:
- Name, address, and GSTIN of the service provider (the professional/firm).
- A unique, consecutive Invoice Number and the Date of issue.
- Client’s Name, Address, and GSTIN (if the client is registered under GST).
- The correct SAC Code for the service provided.
- A clear Description of Services rendered (e.g., “Statutory Audit for FY 2023-24”).
- The Taxable Value of the service (the fee before taxes).
- A clear breakdown of the GST charged (CGST and SGST for intra-state; IGST for inter-state).
- The total invoice value.
- The digital or physical Signature of the authorized person.
The Special Case: Reverse Charge Mechanism (RCM) in Legal Services
While the provider of a service is usually responsible for paying GST, there is a special provision called the Reverse Charge Mechanism (RCM) where this liability shifts to the recipient of the service. This is particularly relevant in the legal field. Understanding RCM is fundamental for anyone dealing with GST for lawyers India. Specifically, when an individual advocate or a firm of advocates provides legal services to any business entity whose turnover exceeds the GST registration threshold, RCM applies. In this scenario, the lawyer does not charge GST on their invoice. Instead, the business entity receiving the legal service is liable to pay the GST directly to the government. This is a critical distinction that affects invoicing and compliance for both the lawyer and their business clients.
Claiming Input Tax Credit (ITC)
One of the cornerstones of the GST system is the seamless flow of tax credit, known as Input Tax Credit (ITC). Just like any other business, professionals registered under GST can claim ITC on the GST paid on their business expenses (inputs). This mechanism prevents the cascading of taxes and reduces the overall cost of operations. Professionals can claim ITC on expenses such as office rent, professional indemnity insurance, purchase of laptops and office equipment, software subscriptions, and other services used for business purposes. To claim ITC, the professional must have a valid tax invoice for the expense, have received the goods or services, and ensure the supplier has paid the tax to the government. Proper GST compliance for CS India, CAs, and lawyers involves not only correct tax payment but also efficient management of ITC to optimize their tax liability.
Conclusion
Navigating the Goods and Services Tax framework can seem complex, but for professionals like Chartered Accountants, Company Secretaries, and Lawyers, it is an extension of the diligence they practice daily. The key takeaways are straightforward: the standard GST rate for most professional services is a uniform 18%, and using the correct SAC code (like 99822 for accounting/tax or 99821 for legal services) is non-negotiable for accurate invoicing and return filing. Furthermore, understanding special provisions, such as the Reverse Charge Mechanism applicable to legal services provided to business entities, is vital for correct compliance. Ultimately, robust compliance with GST for chartered accountants, lawyers, and CS professionals is not just a legal requirement but a hallmark of professionalism that builds trust with clients and ensures the smooth functioning of their practice.
Feeling overwhelmed by GST compliance? Whether you are a professional needing to file your returns or a business managing payments, TaxRobo can help. Our experts simplify GST registration, filing, and advisory. Contact us today for a hassle-free consultation with our TaxRobo Online CA Consultation Service!
Frequently Asked Questions (FAQs)
1. Q: Is GST applicable if a CA provides services to a client located outside India (export of services)?
A: Export of services is generally considered a zero-rated supply under GST, which means no GST is charged on the invoice. However, to qualify as a zero-rated supply, specific conditions laid out in the GST Act must be met, such as receiving payment in convertible foreign exchange. The professional must also report this export transaction in their GSTR-1 filings and may need to file a Letter of Undertaking (LUT) to export without paying IGST.
2. Q: What is the SAC code for a salaried individual hiring a CA for income tax filing?
A: The CA will use the SAC code 99822 on their invoice, which covers accounting, bookkeeping, and tax consultancy services. More specifically, they might use the sub-code 998222 for tax consultancy. They will charge 18% GST on their fee. Since the salaried individual is availing this service for a personal purpose and not for furthering any business, they cannot claim Input Tax Credit (ITC) on the GST amount paid.
3. Q: Does a newly qualified CS with a turnover of ₹5 lakhs need to register for GST?
A: No. The mandatory GST registration threshold for service providers in most states is an aggregate annual turnover of ₹20 lakhs. As long as the CS’s total turnover from all their services remains below this limit in a financial year, GST registration is not required. Consequently, they cannot charge GST on their invoices or claim any Input Tax Credit.
4. Q: As a small business, do I have to pay GST under RCM if I hire a lawyer for a personal matter?
A: No, the Reverse Charge Mechanism (RCM) for legal services is applicable only when the service is received by a “business entity” for business purposes. If you, as a proprietor of a small business, hire a lawyer for a purely personal matter (like a property dispute for your personal residence), RCM does not apply. The transaction would be treated as a service to an individual, and the lawyer’s liability would depend on their own GST registration status.
