Interior designers and architectural firms operate in a dynamic business domain that frequently blurs the line between pure creative consulting services and turnkey construction execution involving materials.
A single mistake in structuring client agreements can determine whether your project is taxed as a professional service (SAC 998391) or as a composite Works Contract under Section 2(119), with profound consequences for valuation, Input Tax Credit (ITC), and audit exposure.
In this guide, we break down the applicable SAC codes, the standard 18% GST rate, the difference between pure design and turnkey contracts, and how to maximize ITC on raw materials.
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The SAC Code Classification for Architects & Designers
| Nature of Service | SAC Code | Applicable GST Rate | Description |
|---|---|---|---|
| Interior Design Services | 998391 | 18% | Aesthetic planning, space layout, mood boards, color palettes, and furnishing advisory |
| Architectural Consulting Services | 998321 | 18% | Structural blueprint design, building plans, elevation drawings, landscape architecture |
| Turnkey Interior Execution (Works Contract) | 995469 / 995476 | 18% | End-to-end execution including supply of false ceiling, electricals, flooring, and fixed woodwork |
| Project Management Consultancy (PMC) | 998339 | 18% | Construction supervision, quality inspection, contractor coordination |
| Custom Furniture Manufacturing / Supply | Relevant HSN (9403) | 18% | Sale of freestanding movable furniture (chairs, sofas, dining tables) |
Model 1 vs Model 2: Pure Consultancy vs Turnkey Works Contract
How you draft your client contracts dictates your indirect tax liability:
Model 1: Pure Consultancy (Fee-Based Advisory)
- Structure: You charge an architectural design fee (e.g., ₹200/sq.ft. or 10% of project cost). The client directly purchases tiles, marble, paints, lighting, and timber in their own name and pays laborers directly.
- SAC Code: 998391 or 998321.
- GST Rate: 18% on your professional fee.
- ITC: You can claim ITC on your office computers, CAD/3D software subscriptions, office rent, and traveling expenses.
Model 2: Turnkey Contract (Works Contract under Section 2(119))
- Structure: You take full responsibility for designing and executing the space for a fixed lumpsum (e.g., ₹25 Lakhs for a 3BHK flat), supplying all materials (tiles, gypsum, veneers, paint, wires) and providing the labor.
- Statutory Classification: Under Section 2(119) and Schedule II, this is a Composite Supply of Works Contract. Even though you are supplying goods, it is legally deemed to be a Supply of Services.
- GST Rate: 18% on the entire contract value.
- ITC: You can claim 100% Input Tax Credit on all building materials (cement, paint, tiles, electricals, glass) purchased to execute the contract. (The general ITC block on construction under Section 17(5)(c)/(d) does not apply to works contractors executing an outward works contract service).
Beware the Free-Standing Furniture Trap
Tax authorities strictly distinguish between fixtures (immovable) and movable furniture:
- Fixtures (Part of Works Contract): Built-in wardrobes, modular kitchen cabinets fixed to walls, false ceilings, and wall paneling become part of the immovable property and are taxed at 18% under works contract rules.
- Movable Furniture: If you supply freestanding dining tables, beds, or couches as part of a package, ensure you bill them at their respective HSN codes or structure them under a unified composite works contract agreement.
When Does an Interior Designer Need GST Registration?
- Threshold: Under Section 22, registration is mandatory once aggregate turnover exceeds ₹20 Lakhs in a financial year (₹10 Lakhs in Special Category States).
- Inter-State Clients: If you are based in Mumbai and take on an interior design project in Goa or Bengaluru, Section 24 requires mandatory GST registration irrespective of turnover if it involves inter-state taxable supplies.
- Section 44ADA Presumptive Tax: For income tax purposes, registered architects and interior decorators with gross receipts up to ₹50 Lakhs (or ₹75 Lakhs if digital collections exceed 95%) can declare 50% presumptive profits under Section 44ADA.
Frequently Asked Questions (FAQs)
Can an interior designer claim ITC on sample tiles and paint swatches?
Yes. Samples, design catalogs, 3D rendering software (AutoCAD, 3ds Max, SketchUp), and VR presentation equipment purchased for business operations are fully eligible for 18% Input Tax Credit.
What is the place of supply for architectural and interior design services?
Under Section 12(3)(a) of the IGST Act, the place of supply for services directly in relation to an immovable property (including architectural drawings and interior design) is the location at which the immovable property is located or intended to be located. If a Delhi architect designs a villa located in Goa, the place of supply is Goa (IGST applies).