GST and TDS for Indian agencies: what actually reaches your bank

An Indian agency almost never collects the number on its invoice. Raise ₹1,00,000 for creative work and the invoice reads ₹1,18,000 with 18 percent GST on top. Your client deducts TDS on the base amount before paying, so roughly ₹1,16,000 arrives if they deduct 2 percent under section 194C, or ₹1,08,000 if they deduct 10 percent under section 194J. Meanwhile the ₹18,000 of GST is due to the government by the 20th of the following month whether or not the client has paid you a rupee, because GST liability is triggered by the invoice date, not the payment date. That gap, between the invoice you raised and the cash that lands, is where most Indian agencies quietly run out of working capital.

This guide is written for agency owners, not for accountants. It does not replace your CA, and it deliberately avoids becoming a filing manual. It covers the handful of things that change how much money you actually have: when the tax is owed, who deducts what, what has to be on the invoice for it to be valid, and the one clause in the GST law that gives you real leverage over a client who will not pay.

Why you pay GST before your client pays you

This is the single most expensive thing that agency owners do not know, and it catches people every year.

Under section 13(2) of the CGST Act, the time of supply for services is the earlier of the date the invoice is issued or the date the payment is received. For an agency raising an invoice on completion and then waiting, the earlier of those two is almost always the invoice date. The moment you raise the invoice, the GST becomes payable in that month's return.

So if you invoice ₹10,00,000 across a month, ₹1,80,000 of GST goes out of your bank by the 20th of the next month. If your clients pay on an average of 55 days, you have funded the government's share of revenue you have not collected, out of working capital, for the better part of two months. Do that every month and you are permanently carrying about two months of your own GST as a loan to your clients.

There is no way to opt out of this, and the composition scheme is not a realistic answer for most agencies. What you can do is stop treating the invoice date as a formality. Invoicing everything on the last day of the month, out of habit, quietly maximises the gap between when you owe the tax and when you collect it.

The one exception worth knowing

If you take an advance, the time of supply is the date you receive it, so GST is due on the advance in the month you receive it. That sounds worse, but it is not: you are holding the client's money, so you are paying the tax out of cash you already have rather than out of your own. This is one of several reasons advance-billed retainers are structurally kinder to an agency's cash position than arrears-billed project work. There is more on that in the guide to retainer structures for Indian agencies.

The 18 percent, and the SAC code that goes on the invoice

Agency services sit in the 18 percent slab. Advertising services fall under SAC 998361, and the broader family of professional, technical and business services sits under SAC 9983. Design, marketing, content, social and digital agency work is taxed at 18 percent.

The rate rationalisation that took effect on 22 September 2025 collapsed the old four-slab structure of 5, 12, 18 and 28 percent into 5, 18 and 40 percent. Agency services were not moved. The 40 percent slab is for luxury and demerit goods and has nothing to do with services like yours.

One exception matters if you buy media on a client's behalf: the sale of space in print media is taxed at 5 percent, while your commission or agency margin on arranging it is still taxed at 18 percent. If you pass through print media costs, those two lines are taxed differently on the same invoice, and collapsing them into one line at one rate is a mistake.

CGST plus SGST, or IGST: it depends where your client is

The split is determined by the place of supply. Under section 12(2) of the IGST Act, where your client is a registered person, the place of supply is the location of that client.

• Client registered in your own state. Intra-state supply. You charge CGST at 9 percent plus SGST at 9 percent.
• Client registered in another state. Inter-state supply. You charge IGST at 18 percent.
• Client outside India. Potentially an export of services, which is zero-rated, but only if the conditions are met, including receipt in convertible foreign exchange. You can export without paying IGST under a Letter of Undertaking. Get this one confirmed for your specific situation rather than assuming.

A Mumbai agency serving a Bengaluru client charges IGST, not CGST plus SGST. Getting this backwards is common, and it is annoying to correct after the return has been filed, because your client's input credit does not match what they expected to claim.

You have 30 days to raise the invoice

Rule 47 of the CGST Rules requires that an invoice for a supply of services be issued within 30 days of the date of supply. Insurers, banks and NBFCs get 45 days; agencies do not.

In practice, agencies break this constantly, not out of defiance but because nobody is sure when the supply happened. The campaign went live in March, the last revision landed in April, the client's approval came in May, and the invoice goes out in June. By then the 30 days are long gone, and the record of what was actually delivered has drifted into somebody's inbox.

The fix is not a better reminder. It is having the delivery record and the invoice come from the same place, so that "what did we deliver for this client last month" has an answer that does not require reconstruction. That is the problem Ancor is built around.

What has to be on the invoice

Rule 46 of the CGST Rules sets out the mandatory particulars. Miss them and your client's accounts team sends it back, which restarts your collection clock from zero. The ones agencies most often get wrong:

• A consecutive serial number, unique for the financial year, no more than 16 characters. Not a number you made up to look established.
• Your GSTIN, and the client's GSTIN where they are registered.
• The SAC code for the service.
• The place of supply and the state, which is what tells the client whether to expect IGST or CGST plus SGST.
• The tax broken out into CGST, SGST, IGST or cess, not a single blended figure.
• Whether reverse charge applies.
• A signature or digital signature.

If your aggregate turnover in any financial year since 2017-18 has crossed ₹5 crore, e-invoicing applies to you and the invoice must be reported to the Invoice Registration Portal to be valid at all. An unreported invoice above that threshold is not merely late; it is not a valid tax invoice.

TDS: does your client deduct 2 percent or 10 percent?

This is worth getting right, because the difference on a ₹10,00,000 year is ₹80,000 of your cash sitting with the government until you file.

The two sections in play are 194C, which covers contracts for carrying out work, and 194J, which covers professional and technical fees. Advertising is explicitly named in the definition of work under 194C. CBDT Circular No. 715 of 8 August 1995 addressed this directly and clarified that a client paying an advertising agency deducts under section 194C.

Two practical consequences follow.

First, whether a given client deducts 2 percent or 10 percent depends on how they have classified what you do, and different clients classify the same agency differently. You will see both on your own ledger. That is normal and not something to argue about unless the classification is clearly wrong.

Second, TDS is deducted on the taxable value, not on the GST. If you invoice ₹1,00,000 plus ₹18,000 GST, a 2 percent deduction is ₹2,000, not ₹2,360. Clients do get this wrong. It is worth a polite line in your payment terms.

The threshold under 194J rose from ₹30,000 to ₹50,000 with effect from 1 April 2025, so small one-off professional engagements may now fall below it.

TDS is not a cost, but it is a cash problem

The deducted amount is credited to your PAN and shows up in Form 26AS and the Annual Information Statement. You claim it against your own tax liability. It is not lost money. But it is money you do not have until you file, and for an agency running on thin working capital, a permanent 2 to 10 percent haircut on every collection is a real constraint on what you can commit to.

The practical discipline: reconcile 26AS against your own invoice ledger at least quarterly. Clients deduct and fail to deposit more often than you would like, and if it is not in 26AS you cannot claim it. Catching that eleven months later, at filing, is too late to have a useful conversation.

The clause that makes a late payer pay

This is the part almost no agency uses, and it is the strongest collections lever in Indian law.

Under the second proviso to section 16(2) of the CGST Act, read with Rule 37 of the CGST Rules, a client who has claimed input tax credit on your invoice and has not paid you within 180 days must reverse that credit, proportionate to the amount unpaid, together with interest. They can re-avail it once they actually pay you, and there is no time limit on re-availing, but in the meantime the reversal is real and it costs them.

So a client sitting on your ₹5,00,000 invoice past 180 days is not just holding your money. They have taken ₹90,000 of input credit they are no longer entitled to, and they owe it back with interest.

This changes the tone of the conversation entirely. You are no longer a vendor asking for a favour. You are pointing out a compliance exposure that their own finance team will care about more than their marketing team cares about your cash flow. In most agencies the person you have been chasing is not the person who will feel this, which is exactly why it works: it gives you a legitimate reason to escalate from the marketing contact to finance.

Do not use it as a threat, and do not lead with it. Use it as a factual note at around the 150-day mark, addressed to accounts, giving them time to act before the reversal is triggered. Most of the time the invoice gets paid rather than explained.

What this adds up to

Take a straightforward month. You invoice ₹10,00,000 of agency fees.

Two numbers are doing the damage. The ₹20,000 of TDS is out of reach until you file. The ₹1,80,000 of GST leaves your account in roughly 20 to 50 days, and the ₹11,60,000 arrives in roughly 55. For most of the quarter you are carrying both.

None of this is avoidable. All of it is plannable, and almost no agency plans it, because the delivery record, the invoice ledger and the collection dates live in three different places and nobody owns the join.

Frequently asked questions

Do I pay GST if my client has not paid me?

Yes. Under section 13(2) of the CGST Act the time of supply for services is the earlier of the invoice date or the date payment is received. For most agency work the invoice comes first, so GST is payable in that month's return regardless of whether the client has paid. This is why an agency with slow-paying clients is permanently funding its own output tax out of working capital.

What GST rate applies to advertising and design agency services in India?

18 percent, under SAC 998361 for advertising services and the SAC 9983 family for professional, technical and business services more broadly. The rate rationalisation effective 22 September 2025, which replaced the 5, 12, 18 and 28 percent slabs with 5, 18 and 40 percent, did not move agency services. Sale of space in print media is the notable exception at 5 percent, though the agency commission on arranging it remains at 18 percent.

Does a client deduct TDS at 2 percent or 10 percent when paying an agency?

It depends how they classify the work. Advertising is named in the definition of work under section 194C, and CBDT Circular No. 715 of 8 August 1995 confirmed that a client paying an advertising agency deducts under 194C, at 1 percent for an individual or HUF and 2 percent otherwise. Work classified as professional or consultancy falls under section 194J at 10 percent. Different clients classify the same agency differently, so most agencies see both rates on their own ledger.

Is TDS deducted on the GST portion of my invoice?

No. TDS is deducted on the taxable value of the service, not on the GST charged on it. On an invoice of ₹1,00,000 plus ₹18,000 GST, a 2 percent deduction is ₹2,000. Clients do get this wrong, so it is worth stating in your payment terms.

How long does a client have to pay before losing their input tax credit?

180 days. Under the second proviso to section 16(2) of the CGST Act, read with Rule 37 of the CGST Rules, a client who claimed input tax credit on your invoice and has not paid you within 180 days must reverse that credit proportionately, with interest. They can re-avail it when they pay, with no time limit on re-availing. Raised factually with the client's finance team at around 150 days, this is the most effective collections lever an Indian agency has.

When must an agency issue a GST invoice?

Within 30 days of the date of supply of the service, under Rule 47 of the CGST Rules. The 45-day window applies only to insurers, banks, financial institutions and NBFCs. The practical difficulty for agencies is not the deadline but knowing when supply happened, which is why the delivery record and the invoice should come from the same system.