The beauty and wellness sector in India, a lifeline for personal grooming and hygiene, is facing a critical juncture. This industry provides essential services, creates employment opportunities, and supports small businesses. However, the current Goods and Services Tax (GST) structure poses significant challenges, especially for small and mid-sized establishments. Hence, Hair & Beauty Federation has appealed to the Ministry of Commerce and Industry for GST reforms.
The industry faces grave challenges due to the high GST rates levied on basic grooming services, such as threading, waxing, shaving, and hair cuts and dyes. Often considered luxuries, these grooming procedures form the basis of a person’s regular upkeep and hygiene. These are not indulgences or luxuries, but bare minimum necessities in today’s day and age.
At present, 18 per cent GST is levied on these basic services. Also, 18 per cent GST is levied on the products that are used for these services, making it a financial burden. Parlours and salons end up paying direct or indirect GST for basic procedures as well.
In view of this, the Hair & Beauty Federation, representing over 80 lakh salons across India, has appealed to the Ministry of Commerce and Industry to review the GST rates.
The Need For GST Reforms
The current tax policies have significantly burdened salon and beauty parlour owners. It is increasing expenses while decreasing income. Post-pandemic, footfall has dropped by 35-40 per cent as semi-educated individuals, especially women, have shifted to providing home services, which are cheaper and more convenient. This trend has led to semi-unemployment for both home service providers and salon operators.
Salon owners face fierce competition, with discounts exceeding 50 per cent and haircuts priced as low as Rs. 30-50. Despite soaring costs of essentials like food, fuel, rent, education, and cosmetics, service prices are only revised every 3-5 years, unlike the daily rise in inflation. Adding to the strain, salon operators must pay 18 per cent GST on consumables like wax and cosmetics, often absorbing these costs since customers rarely cover GST. Additionally, they offer complimentary services like tea and coffee, further squeezing profits.
The combination of high operational costs, low service rates, and competitive pricing has left salon owners in a precarious financial position, struggling to sustain their businesses amidst growing economic pressures.
The Case for GST Reform
The Hair & Beauty Federation has urged the government to recognise the critical role of the beauty and wellness sector in India’s economy and public health landscape. Implementing the following measures would revitalise the industry:
- Exempt essential services like threading, waxing, and haircuts from GST.
- Reduce GST on advanced services and consumables to 5 per cent.
Exemption on Essential Services
The HBF has strongly advocated for GST exemption on basic services like threading, waxing, shaving, haircuts, and hair dyeing. Exempting these services from GST would make them more accessible and affordable for consumers and more financially viable for salons.
Reduction of GST to 5% for Advanced Services
Furthermore, the HBF has requested the ministry reduce GST to 5 per cent for more advanced beauty services. This is necessary to ensure affordability and maintain service quality. It would allow salons to retain their clientele while offering high-quality services at competitive rates.
Economic and Social Benefits of GST Reduction
Boosting Employment
The beauty and wellness sector is a significant employer, particularly in Tier-II, Tier-III cities, and rural areas. Lower GST rates could help salons sustain operations, safeguard existing jobs, and create new opportunities, especially for women and youth.
Encouraging Economic Growth
Affordable grooming services would lead to higher consumer spending, indirectly benefiting ancillary industries like cosmetics and equipment manufacturing. This, in turn, would contribute to the country’s broader economic development.
Promoting Hygiene and Public Health
Regular grooming and personal care services play a vital role in maintaining hygiene and cleanliness. Affordable access to these services would align with public health objectives, making grooming a basic right for every Indian.
Supporting Small Businesses
Small and mid-sized salons form 80 per cent of the industry and are most affected by the current GST structure. GST reforms would help these businesses regain profitability and contribute significantly to local economies.
Challenges Faced Post-Pandemic
The COVID-19 pandemic severely impacted the beauty and wellness sector, leading to widespread closures and unemployment. Thousands of parlours shut down, and many that remain operational are struggling to survive. The high GST rates on consumables like wax, waxing strips, facial kits, and threading threads further erode the thin profit margins of small salons.
