Salon, gym, yoga centre services to get cheaper after GST slashed to 5%

Salon and fitness bills are likely to get cheaper as the GST rate on beauty and physical well-being services, including those at health clubs, salons, barbers, fitness centres, yoga, etc, has been slashed from 18 per cent with Input Tax Credit (ITC), to 5 per cent without tax credit.

Also, daily use products like hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, too, are likely to get cheaper as taxes on them have been cut to 5 per cent from 12/18 per cent currently.

The new Goods and Services Tax (GST) rate will be effective from September 22. As part of the rate rationalisation exercise at the 56th meeting of the GST Council, the Centre and states consented to reduce GST from 18 per cent to 5 per cent on beauty and physical well-being services used by the common man, including services of gyms, salons, barbers, yoga centres, etc.

Other daily use items like talcum powder, face powder, shaving cream and aftershave lotion, too, could see the reduction in prices as GST has come down to 5 per cent from 18 per cent.

Issuing a set of FAQs, the finance ministry said the GST rate rationalisation is "intended to lower the monthly expenditure for the lower middle class and the poorer sections of society" and hence, even though toilet soap bar has been slashed to 5 per cent, liquid soaps have been retained at 18 per cent.

To a question on the reason for reducing GST on face powder and shampoos and whether this will benefit MNCs and luxury brands, the ministry said these goods are daily-use items for almost all segments of the population.

"Although expensive face powder and shampoos sold by MNCs or luxury brands will also benefit, the objective of the rate rationalisation exercise is to further simplify the tax structure. Administering a tax based on brand or value of cosmetics will create complexity in the tax structure, besides posing challenges for administration," the ministry added.

Similarly, GST has not been reduced on mouthwash, but the tax rate on toothpaste, toothbrush and dental floss has been cut to 5 per cent as these are "in the nature of basic dental hygiene goods".

AMRG & Associates Senior Partner Rajat Mohan said by including health clubs, salons, barbers, fitness centres, and yoga under this concessional bracket of 5 per cent, the government has attempted to reposition personal care and wellness as accessible essentials rather than luxuries.

"From a consumer's perspective, this should bring down costs and expand access to wellness services," he said.

Explaining further, Mohan said a critical issue in this rationalisation is that the new rate comes without ITC.

For service providers with substantial input costs on rent, consultation, consumables, and infrastructure, this means that taxes paid on inputs will no longer be creditable. This could neutralise part of the consumer benefit, as providers may still embed these costs into their pricing structures, he said.

"This reform is emblematic of a broader 'reboot mode' for the GST economy, a sweeping simplification intended to reset the tax landscape. Yet, whether the intended benefits fully materialise remains uncertain. Much will depend on whether industry players actually pass on the reduced tax burden to customers. In the absence of the Anti-Profiteering Authority, ensuring that rate reductions translate into real consumer savings may prove challenging," Mohan said.