In a move that reshapes the cost structure of India’s wellness and personal care industry, the Central Board of Indirect Taxes and Customs (CBIC) has issued a clear directive: starting September 22, 2025, a flat 5 percent Goods and Services Tax (GST) will be mandatory on services such as salons, gyms, spas, and yoga classes. The announcement, part of the broader GST 2.0 reform, replaces the previous option of charging 18 percent GST with input tax credit (ITC), streamlining taxation but also shifting the financial dynamics for service providers.
Here’s a comprehensive breakdown of the change, its implications, and what it means for consumers and businesses alike.
Key Highlights of the CBIC Directive
- Effective September 22, all beauty and physical well-being services must charge 5 percent GST without claiming ITC.
- The previous dual-option system—where providers could choose between 5 percent without ITC or 18 percent with ITC—is now discontinued.
- The directive applies to salons, gyms, spas, yoga studios, and similar wellness services across India.
- The change is part of the GST 2.0 overhaul, which aims to simplify the tax structure and reduce consumer burden.
Impact on Consumers
1. The most immediate benefit is a reduction in the final bill for customers. For example, a Rs 1,000 gym membership that previously cost Rs 1,180 with 18 percent GST will now be billed at Rs 1,050.
2. Similarly, a Rs 500 salon service will drop from Rs 590 to Rs 525, making personal care more affordable and accessible.
3. With the festive season approaching, the timing of this reform is expected to boost discretionary spending on wellness and grooming.
4. Consumers may find themselves more inclined to book spa sessions, join fitness programs, or indulge in self-care routines that previously felt like luxury expenses.
Implications for Service Providers
1. While the lower GST rate benefits customers, service providers will no longer be able to claim input tax credit on expenses such as rent, equipment, and consumables.
2. This could increase operational costs for salons, gyms, and yoga studios, especially those in urban areas with high overheads.
3. Businesses may need to recalibrate pricing models to maintain profitability without passing on the full cost to consumers.
4. Some operators may explore bundling services, offering loyalty programs, or shifting to leaner business models to absorb the financial impact.
5. Industry experts suggest that while the short-term adjustment may be challenging, the long-term effect could be positive if increased footfall offsets the loss of ITC.
Broader GST 2.0 Reform Context
1. The GST Council, led by Finance Minister Nirmala Sitharaman, has introduced a simplified slab structure under GST 2.0.
2. The new system consolidates rates into two primary slabs—5 percent and 18 percent—eliminating the previous 12 percent and 28 percent categories, except for luxury and sin goods.
3. The reform is positioned as a Diwali gift to citizens and businesses, aiming to reduce the cost of living and stimulate economic activity.
4. The wellness sector is among the first to feel the effects, with the CBIC’s directive serving as a pilot for broader implementation.
Conclusion: A Leaner Tax for a Lighter Bill
The mandatory 5 percent GST on salons, gyms, and yoga classes marks a significant shift in India’s approach to taxing wellness services. While consumers stand to benefit from lower costs, service providers must navigate the loss of input credits with strategic agility. As the GST 2.0 era begins, this reform sets the tone for a more streamlined, consumer-friendly tax regime—one that trims complexity while toning up affordability.
Sources: MSN India, CNBC TV18, Business Today, News18.
