GST for service and repair businesses

Parts and labour: one supply or two?

When parts and labour are separately priced on the invoice, they are generally treated as separate supplies: parts at the goods' rate under their HSN, labour at the service rate under the SAC for repair and maintenance (heading 9987). When you charge a single price for a repair that includes parts, it is likely a composite supply, taxed at the rate of the principal supply, which is usually the service.

Example. An AC service centre replaces a compressor and repairs the unit.

Here both rates are the same, so the split does not change the tax. Where parts carry 5% and labour 18%, itemising matters. Confirm the current rates for your HSN and SAC on cbic-gst.gov.in.

When to issue the invoice

• For services, the tax invoice must be issued within 30 days of completing the service.
• For parts sold on their own, at or before delivery.
• Time of supply for services is generally the earlier of invoice date and payment date, so an advance can fix the tax point.

A practical rule: close the job card and raise the invoice the day the item is handed back. See job card and service invoice.

Advances

GST on advances for goods is not payable for most taxpayers, but GST on advances for services is. If a customer pays ₹5,000 in advance for a repair, issue a receipt voucher and pay GST on that advance in the month received. When the final invoice is raised, adjust the tax already paid. Details in GST on advances received.

Example. Advance ₹5,900 received for a repair at 18%: taxable value ₹5,000, GST ₹900 paid in the month of receipt. Final bill next month ₹11,800 (taxable ₹10,000, GST ₹1,800): pay only the balance ₹900 that month.

Annual maintenance contracts

An AMC is a service supplied over a period. If billed upfront, GST is due on the invoice. If billed in instalments (quarterly or monthly), each instalment is due on its invoice or payment. Parts included 'free' in a comprehensive AMC are part of the AMC price; parts charged extra go on separate lines. More on structuring in annual maintenance contracts.

Warranty repairs and replacements

Under warranty, the customer pays nothing, so there is no supply to the customer. The service centre usually bills the manufacturer or brand for the labour and sometimes for the parts, and charges GST on that bill. Parts supplied by the brand for free replacement and replacements under warranty have specific clarifications on ITC and tax. The treatment depends on who supplies the part and whether anyone pays for it, so set it up once with your CA. This is general information, not tax advice.

Common mistakes

• Billing everything as 'service charges' at one rate when parts carry a different rate.
• Not paying GST on advances for services.
• Jobs completed but invoiced weeks later, after the 30-day limit.
• Free replacements with no paper trail, so stock and ITC do not reconcile.
• Using HSN codes for labour instead of SAC.

Service jobs in Cashflow OS

Cashflow OS has a service jobs module for repair and pickup jobs. Staff open a job, add items or service charges as the work progresses, and close and invoice it, with the invoice posted to TallyPrime when writing back is switched on; Tally validates it and GST is worked out from the item and the party's state. Parts and labour stay separate lines because they are separate items. The jobs, invoices and GSTR-1 view are all available on the phone.