Here’s some great news for the beauty and wellness industry, and salon clients in general. The GST council led by Finance Minister, Nirmala Sitharaman, has decided to cut the Goods and Services tax (GST) on beauty, wellness and physical well-being services from 18% to 5%, without Input Tax Credit (ITC). This move offers a much-awaited relief for salon professionals as well as their clients. This makes beauty, wellness and grooming services more affordable and accessible across the entire country. This rate will be effective from 22 September, 2025.
Self-care Made Affordable
Earlier, salon services were taxed at 18%, which added a sizable amount to the already-high service costs. A lot of consumers even stopped going to luxury salons owing to the high GST. A lower GST definitely makes your services cheaper for your clients. When more people can afford to book, it surely means more business for you.
Besides beauty, the government has also extended tax relief to personal care products. This includes a lower GST on soaps, shampoos and other well-being essentials. It has shifted to the 5% slab from the earlier 12-18%.
This will entirely change the way salons and wellness businesses operate.
Though the new GST slab will apply from 22September, it’s important that salon owners are ready before this. It’s important that they update their salon billing software, and price lists so that there is no confusion later.
While it is a win-win for salon owners as well as clients, there is only one downside for salon owners. The 5% GST does not allow ITC. This means, salon owners cannot claim back the tax they pay on products, rent or equipment. This is particularly an important part for profit planning. Service providers lose out on ITC benefits. Small and medium neighbourhood salons can offer more competitive rates and increase their footfalls.
Salon & Wellness Services now at 5% GST
The implementation of the new GST slab has resulted in mixed responses from India’s salon and beauty industry. However, here are some of the positive changes this move brings:
- Customers Can Enjoy Lower Prices
With GST reduced, overall salon services cost should definitely come down. This makes beauty services more affordable. The middle- and lower-income groups will experience relief. Over a period of time, lower service costs will lead to increased footfalls, repeat business from clients and frequent use of services. For instance, there are a lot of clients who prefer getting their hair washed and blow dried from a salon. However, the 18% GST would sometimes deter consumers. Not anymore, the 5% GST slab will in fact attract customers.
- Demand Boost for All Kinds of Salons
Consumers consider beauty and wellness services as aspirational. It even comes under the discretionary spending category. With the GST coming down to 5%, certain services become less of a burden. This is a great moment for salons and spas as they can expand their existing customer base. Mid-segment salons and parlours may also see more clients come through their door who earlier avoided certain luxury services because of their cost.
- Offers a Competitive Advantage
Salon and other service-oriented businesses thrive on smart pricing. Even if one salon reworks on their pricing, customers going to another salon may shift to the cheaper alternative. Competitive pricing leads to innovation. Salons will experiment with revived loyalty and reward programs, and affordable packages too.
- Gives Allied Businesses a Boost
When there is an increased demand in salons and wellness centres, allied businesses will also get a boost. They will not just make more money but also generate more employment.
The Big Change – What Every Salon Owner Must Know?
The 5% GST rule is definitely a positive reform for the wellness sector. However, what should industry players do? How should they prepare for something like this?
Here’s how:
- Reprice Tactfully
With the GST cut, every salon owner will have to sit on their pricing again. They will have to determine how much of the GST will they have to pass vs retain to cover input tax loss. Offering tiers and bundles will be the best bet as this will help them attract more service volume.
- Send out Communication to Clients
Though the new GST rule came in two weeks ago, a lot of clients are unaware of the sectors that are positively impacted. Thus, create marketing material and communication that lets your clients know that now you are much cheaper and affordable. This will surely bring in new clients who were earlier hesitant to try your services.
- Ensure Compliance & Regulation
When you revise your pricing, it is important to make sure that your invoicing reflects new GST rates. From the 22nd of September, automatically the 5% GST should apply to the invoice. Your salon or spa can be pulled up if you’re still following the old GST slab.
- Leverage Increased Demand
Your ITC may have reduced but your demand would have increased considerably. Thus, use this moment to expand value-added services, cross-sell and upsell. With aggressive marketing, you can scale faster without diluting fixed costs.
- Track Profits & Stay Ahead
A GST cut should be looked at positively. It’s meant to grow your business. Once the 5% GST is in place, it’s important to change price charts, update billing and communicate the same to customers. This will also help you track profits and stay ahead. Regular tracking needs effort. This will help you adjust cash flow and stay ahead of your competitors.
How Will Salon Billing Software Help You Cope with GST Changes?
- Automatic GST Invoicing
Once the GST cut is implemented, those rates need to be updated across all services. When you’re generating an invoice for a client during checkout, the new 5% GST rate will automatically apply on all services. This will ensure accurate billing and absolutely no human-error. This also keeps your business compliant.
- Inventory Management
With no input tax credit (ITC), salon owners will have to control input costs. Doing it manually can be tedious. Salon software helps by tracking product usage, issuing alerts for products in low stock, and by analysing which services have high input costs.
- Generate Automated Reports
You will be able to get a service-wise revenue breakdown. This will give you a clear picture of every service before and after GST. You can also pull out daily, weekly and monthly reports to get a clear idea of your sales and GST collection.
FAQs on GST Cut
- What is the new GST rate for salons and beauty parlours in India?
The GST on beauty, wellness, spa and salon services has been reduced from 18% to 5%.
- Is the new 5% GST rate with or without input tax credit (ITC)?
The new 5% GST slab for salons is without ITC. This means salons can no longer claim credit for inputs like equipment, rent and consumables.
- When will the new GST rate come into effect?
The new GST rate will be effective from 22 September 2025.
- Will the GST cut affect my salon pricing?
Yes, it will. You need to update your billing software with the new GST rate of 5%. This will benefit consumers as they can enjoy your services for cheaper.
- Do I need to manually change the GST rates in my billing system?
Yes, unless you use salon software that automatically updates tax rates.
- Will the change affect my profits?
While a lower GST will definitely boost customer footfall, input costs become non-recoverable. This can affect your margins in the long run. Profitability depends on how well you adjust your pricing.
- Will lower GST help my salon earn more?
For sure. With the GST being reduced to 5%, your services are definitely more attractive to your existing as well as new clients. Even though ITC is discontinued, more bookings mean more revenue.
Final Words
The GST cut presents a huge opportunity for salons in India. With services becoming more affordable, you can definitely bring in more clients through the door. Don’t look at it as just a policy change. It is a lifestyle enabler. When your customers are able to save more, your business too will flourish. Don’t let the new tax rule intimidate you. Let GST billing software like Salon360App handle everything for you. It will help you update your pricing easily, communicate these changes to clients and enhance your sales by generating clear profit reports.
