Service Agreement – free template

Overview

A Service Agreement records the terms on which a service provider (an individual professional, freelancer, or a services company) agrees to perform defined services for a client business in exchange for fees. In India, such agreements are governed by the general law of contract set out in the Indian Contract Act, 1872, which requires a lawful offer and acceptance, consideration, capacity to contract, and free consent for the agreement to be enforceable. Because Indian law does not have a dedicated statute for commercial services contracts, the terms the parties actually agree — scope of services, fees, timelines, termination, liability — carry significant weight, and the Contract Act's default rules (including Section 73, which governs the measure of damages recoverable for breach of contract) apply to fill gaps the agreement leaves open. Scope and deliverables should be defined precisely, since a services contract that leaves the scope of work vague is a common source of disputes over what was actually promised. The agreement should also specify whether the relationship is one of independent contractor or employment in substance, since misclassifying an effectively employment relationship as a service agreement can expose the client to labour-law and statutory-benefit obligations it did not intend to assume. Tax treatment is an important practical dimension of any Indian service agreement. Where the service provider is registered under the Goods and Services Tax (GST) regime, GST is generally chargeable on the value of services supplied, and the agreement should clarify whether quoted fees are inclusive or exclusive of GST. Certain categories of services may also fall under the reverse charge mechanism, under which the recipient (the client) rather than the supplier is liable to pay GST directly to the government — parties should confirm whether reverse charge applies to the specific services in question. Separately, under the Income Tax Act, 1961, a client paying a resident service provider above prescribed thresholds is generally required to deduct tax at source (TDS) — commonly under provisions such as Section 194J for professional or technical services — and remit it to the government, issuing the provider a certificate they can claim as credit against their own tax liability. The applicable TDS rate and threshold can change and depend on the nature of the service and the provider's status, so this should be confirmed against the current Income Tax Act provisions and rules rather than assumed. Liability provisions typically include an indemnity (the service provider indemnifying the client for losses arising from breach, negligence, or third-party claims caused by the provider's work) and a limitation of liability clause capping the provider's aggregate exposure, commonly by reference to fees paid, subject to exclusions such as for wilful misconduct or breach of confidentiality that Indian courts may in any event scrutinise for reasonableness under general contract principles. Stamp duty on service agreements is governed by each state's own Stamp Act and therefore varies by state, both in rate and in whether stamping is mandatory for the value or type of agreement in question; there is no single national stamp duty rate for commercial service agreements, so parties should confirm the position in the state where the agreement is executed or where the counterparty is based. Well-drafted service agreements also address confidentiality, intellectual property ownership in deliverables, payment terms and late payment consequences, termination rights (including for convenience and for cause), and dispute resolution, including whether disputes are to be resolved by arbitration under the Arbitration and Conciliation Act, 1996 or by the courts.