GST in Hyderabad: CGST, Telangana SGST, and IGST — FY 2025-26 Guide
Goods and Services Tax (GST) in Hyderabad, Telangana operates under a dual structure administered jointly by the Government of India and Telangana state government. Whether you are a business owner in the HITEC City / Financial District area, a consumer buying services inHyderabad, or a freelancer invoicing clients across India, the applicable GST component — CGST + Telangana SGST or IGST — depends on whether the supply is intra-state or inter-state. Telangana's registration charge is only 0.5% — the lowest among all metro cities. On a Rs 80 lakh home in Gachibowli, this saves Rs 40,000 vs the 1% charged in Maharashtra or Tamil Nadu. Hyderabad is also non-metro for HRA purposes, meaning IT professionals get the 40% HRA cap, not 50%.
CGST vs Telangana SGST vs IGST: How It Works in Hyderabad
The fundamental rule:
- Intra-state supply (supplier and recipient both in Telangana): GST = CGST (central government) + Telangana SGST (Telangana government), each at half the total GST rate. On a Rs 1,00,000 invoice at 18%: CGST Rs 9,000 (9%) + Telangana SGST Rs 9,000 (9%).
- Inter-state supply (supplier in Telangana, recipient in another state, or vice versa): GST = IGST at the full rate. Same Rs 1,00,000 invoice at 18%: IGST = Rs 18,000 (18%), all to central government (then apportioned to destination state).
- Import of services: IGST under Reverse Charge Mechanism (RCM) — the recipient in Hyderabad pays GST to the government. Common for Hyderabad's businesses using foreign software, cloud services, or overseas consultants.
GST Rates Applicable to Hyderabad's Economy
The four main GST rate slabs apply uniformly across Hyderabad:
- 5% GST: Essential goods and basic services. For Hyderabad: non-AC restaurant meals (no ITC for restaurant), economy hotel stays (room rate below Rs 7,500/night), packaged foods with certain HSN codes, economy air travel (excluding fuel surcharge), electric vehicles, and textile goods below Rs 1,000.
- 12% GST: Mid-range goods and services. Relevant for Hyderabad: hotel stays Rs 7,500–12,000/night, processed food, computers and laptops (with exceptions), smartphones above Rs 20,000 category, business class air travel, construction of affordable housing.
- 18% GST: Most services and manufactured goods. This is the dominant GST rate for Hyderabad's IT/ITES sector — IT services, consulting, financial services, insurance (excl. life insurance), telecom, steel, chemicals, paints, AC restaurants, hotel stays above Rs 12,000/night.
- 28% GST: Luxury and demerit goods. Hyderabad: automobiles (plus cess), luxury hotels, tobacco products, gambling and racing activities, luxury cement. Plus additional cess on many 28% items.
IT/ITES Sector GST in Hyderabad
Hyderabad's dominant IT/ITES sector — represented by employers like Microsoft, Google, Amazon — operates primarily under 18% GST for domestic B2B service invoices. Key GST considerations for Hyderabad IT businesses:
- Software services export (zero-rated): IT exports from Hyderabadto overseas clients are zero-rated with a Letter of Undertaking (LUT). No GST is charged on the invoice, and businesses can claim refund of Input Tax Credit on inputs used. Filing monthly LUT for exports is critical for Hyderabad IT exporters.
- Domestic IT B2B invoices: 18% GST applies. On a Rs 10L monthly invoice to a Telangana client: CGST Rs 90,000 + Telangana SGST Rs 90,000 = Rs 1.8L total GST. This is fully recoverable as Input Tax Credit by the recipient if they are GST-registered.
- SaaS and software products: 18% GST on perpetual licences, 12% on some packaged software. Cloud-based SaaS services are 18% regardless of how subscription is structured.
- Professional and consulting services: 18% GST under SAC 9983/9985. Freelancers and consultants in Hyderabad billing above Rs 20L/year must register for GST and charge 18% CGST + Telangana SGST on domestic invoices.
- Commercial property rent: If annual commercial rent in Hyderabadexceeds Rs 20L and the landlord is a GST-registered entity, 18% GST applies. At estimated commercial rents of Rs 55,000/month in Hyderabad, annual commercial rent is Rs 6,60,000. Annual commercial rent is below Rs 20L — GST on rent may not apply if the landlord is under threshold.
Input Tax Credit (ITC) for Hyderabad Businesses
GST-registered businesses in Hyderabad can claim Input Tax Credit on GST paid for goods and services used in their business. ITC rules in Telangana:
- CGST paid can offset CGST or IGST liability; Telangana SGST paid can offset Telangana SGST or IGST; IGST can offset any GST liability (IGST first, then CGST, then SGST).
- Conditions for ITC: Valid tax invoice, goods/services received, GST filed by supplier (reflected in GSTR-2B), and payment made to supplier within 180 days.
- ITC blocked items: Motor vehicles (for personal use), employee-related food and beverages, club memberships, health insurance for employees (unless mandatory under law), works contract for immovable property.
- ITC reconciliation: GSTR-2B (auto-populated) vs your purchase register must be reconciled monthly. Mismatch can lead to ITC disallowance and penalty — a critical compliance task for Hyderabad's MSMEs and large businesses alike.
GST Registration Threshold and Compliance for Hyderabad
GST registration is mandatory in Telangana when aggregate turnover exceeds:
- Rs 40 lakh/year for goods suppliers (Rs 20L for special category states — not applicable to Telangana).
- Rs 20 lakh/year for service providers.
- Any threshold for inter-state supplies, e-commerce operators, or businesses with taxable supplies despite low turnover.
Hyderabad freelancers and consultants in the IT/ITES sector who provide services to clients in other states must register for GST irrespective of turnover — even a single inter-state invoice triggers mandatory registration. Return filing: GSTR-1 (monthly/quarterly for outward supplies) + GSTR-3B (monthly summary + tax payment) + GSTR-9 (annual reconciliation). Businesses in Hyderabad with turnover above Rs 5 crore must file GSTR-1 monthly. Below Rs 5 crore, quarterly GSTR-1 filing is available under the QRMP scheme.
Composition Scheme: For Small Hyderabad Businesses
Small Hyderabad businesses with annual turnover below Rs 1.5 crore (goods) or Rs 50 lakh (services) can opt for the Composition Scheme — pay a fixed percentage of turnover as GST (1% for goods, 6% for services including restaurants) without ITC. Composition dealers cannot raise a tax invoice or collect GST from customers, and cannot supply inter-state. This suits small retailers, restaurants, and service providers inHyderabad's HITEC City and Gachibowli local markets who do primarily local business.
Disclaimer
GST rates and rules are based on notifications effective as of FY 2025-26. Specific HSN/SAC codes may attract different rates. Special economic zone (SEZ) supplies are zero-rated. E-invoicing is mandatory above certain turnover thresholds. Consult a GST practitioner or Chartered Accountant in Hyderabad for business-specific compliance guidance.