Chartered Accountant (CA), Company Secretary (CS), and Cost and Management Accountant (CMA) firms provide professional services that are subject to GST at 18%. Multi-locational firms face additional complexities regarding ITC distribution and cross-charge between branch offices.
This article explains the GST requirements for CA, CS, and CMA firms.
GST Registration for Professional Firms
CA, CS, and CMA firms are required to register for GST once their aggregate turnover exceeds ₹20 lakh in a financial year (₹10 lakh for special category states). For firms providing inter-state services, registration is mandatory from the first transaction.
GST Rate on Professional Services
Professional services provided by CA, CS, and CMA firms attract GST at 18% . This includes:
- Audit and assurance services.
- Tax advisory and compliance.
- Company secretarial services.
- Cost audit and management accounting.
- Consultancy and advisory services.
ITC for Professional Firms
Professional firms can claim ITC on GST paid for:
- Office rent and utilities.
- Software and tools.
- Professional literature and subscriptions.
- Staff training and development.
- Marketing and advertising.
- Professional indemnity insurance.
Cross-Charge Between Branch Offices
For multi-locational firms, transactions between branch offices are subject to GST as supplies between distinct persons. Under Section 25(4) of the CGST Act , establishments of the same person in different states are treated as distinct persons.
This means that when one branch provides services to another branch, it must charge GST at 18%. The recipient branch can claim ITC on the GST paid.
The ISD Mechanism
From April 1, 2025, multi-locational entities must use the Input Service Distributor (ISD) mechanism to distribute common ITC across their GST registrations. The ISD mechanism replaces the cross-charge approach for distributing common input service credits.
Under the ISD mechanism:
- The head office (or a designated branch) registers as an ISD.
- Common input services are billed to the ISD.
- The ISD distributes the ITC to the branches based on their turnover.
- The ISD files GSTR-6 monthly.
Compliance Checklist for Professional Firms
- Register for GST if turnover exceeds the threshold.
- Charge 18% GST on professional services.
- Register as an ISD if distributing common ITC.
- File GSTR-1, GSTR-3B, and GSTR-6.
- Reconcile ITC claims with GSTR-2B.
- Maintain proper records for cross-charge and ISD transactions.
Conclusion
CA, CS, and CMA firms must comply with GST registration, invoicing, and return filing requirements. Multi-locational firms must use the ISD mechanism for distributing common ITC. Non-compliance can lead to ITC denial and penalties.
At Anuj Desai & Associates, we provide expert advisory services on GST for professional firms, including registration, ITC claims, and ISD compliance. Our team can help you navigate the complexities of GST for multi-locational practices.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.