GST For Freelancers: Everything You Need to Know

In recent years, India has witnessed a remarkable surge in the number of freelancers. Armed with their skills and expertise, these self-employed professionals are carving out a niche for themselves in various industries.

However, amidst pursuing financial independence, one crucial aspect that demands attention is understanding and navigating the complex world of Goods and Services Tax (GST).

This comprehensive blog post aims to shed light on the technical aspects of GST for freelancers, exploring its significance, and more. Gain a thorough understanding of GST and equip yourself to thrive in the freelance landscape in the country.

Should You Register For Gst As A Freelancer?

Whether or not you should register for GST as a freelancer is determined by several factors, including your annual revenue, the sort of services you provide and your location.

If your annual turnover exceeds the GST registration threshold, you must register for GST.

• For states other than the North-Eastern states, the GST registration threshold for freelancers is 20 lakhs each fiscal year.
• In the North-Eastern states, the limit is Rs. 10 lakhs.

If you are unsure whether to register for GST, you should speak with a tax advisor.

Here are some additional things to keep in mind when deciding whether or not to register for GST as a freelancer:

• The nature of your services: Some services are exempt from GST, while others are subject to GST at varying rates.
• Your current location: The registration threshold for GST varies by state.
• Your competition: If your competitors are GST registered, you may be at a competitive disadvantage if you are not.
• Your plans for the future: If you intend to develop your business or enter new markets, you should register for GST now to avoid having to do so later.

Voluntary Registration

Voluntary registration refers to the option available for businesses to register for GST even if they do not meet the mandatory registration threshold. In other words, it enables businesses to actively register for GST even if their turnover is lower than the established threshold.

An individual will be governed by all GST rules if they choose to register freely. In other words, he has obligations like filing returns, collecting and paying GST, etc.

For example, a GST of 18% is required if a business runs ads on Google to attract new clients. Such GST cannot be claimed if a business does not register.

Providing Service Through Online Platforms

Whether services are provided through online platforms like Upwork or Fiverr or directly to clients, GST regulations have no differences.

• For example, let’s assume that a freelance graphic designer works for a customer from another country. If the service comes under the “export of services” category, it is zero-rated under GST legislation. To benefit from the zero-rating benefits, the freelance graphic designer must be registered with GST and present the relevant documentation to show the export nature of the service.
• When the client is located in India, the provision of services is not classified as an “export of services”, and GST applies to such transactions.

In the case of services offered through any of these platforms, it is the freelancer’s sole responsibility to collect GST, while the marketplace itself has no involvement or role in the GST process.

Documents Required For GST Registration

To successfully register for GST, you will need to gather the following documents:

1. A recent passport-size photo
2. Copies of PAN and Aadhaar card for identification purposes.
3. Identification and residence evidence: Documents that establish your identity and residential address.
4. A bank account statement or cancelled check
5. A digital signature to authenticate your online registration.
6. A copy of a recent electricity or telephone bill as proof of your business address.
7. Office lease agreement, if applicable
8. No objection certificate: A document stating that you have no objection to conducting your business at your chosen location.

By ensuring you have these necessary documents ready, you can streamline the GST registration process and comply with the requirements effectively.

GST Rules For Freelancers

For GST-registered freelancers, a range of payment terms and conditions (T&C) apply. Here are some of them:

• Once registered for GST, you must add the tax to your services. Depending on the type of service you provide, a unique GST rate will apply.
• Additionally, you must submit monthly or quarterly GST returns. Your turnover will determine how frequently you must file taxes.
• You might be penalised for not submitting the GST proceeds on time. There will be a fine of Rs.200 for being late. A minimum penalty of 10,000 would be applied if the tax wasn’t paid.
• The invoice might be issued on the first day of the following month to ensure that GST is submitted on time. As a result, you will have time to pay your monthly GST bill.
• After paying all required taxes, you must file a GSTR 3B monthly summary return.
• If your annual turnover is less than Rs. 1.5 crore, you are eligible to use the composition scheme. The composition scheme will pay a portion of your revenue as GST.

Should You File Your Returns?

A total of 25 returns must be filed, including one annual return and two monthly filings.

If you work as a freelancer, your clients expect you to raise invoices. According to rules established by the Indian government, TDS must be withheld from payments paid to individuals or other companies for services provided.

TDS is deducted at 10% in the case of freelancers.

Even if you raise invoices, you are not required to register for GST if your income is less than Rs. 20 lakhs or Rs. 10 lakhs (for states in special categories).

TCS (Tax Collected at Source) under GST

The Tax Collected at Source (TCS) mandates that e-commerce platforms collect tax from freelancers who provide goods or services through their platforms. The TCS rate is 1% of the service’s net taxable value.

All e-commerce sites, including Freelancer.in and Upwork, are subject to GST’s TCS provision. However, only freelancers who are GST-registered are required to have the TCS collected from them. Freelancers who did not register for GST are exempt from paying the tax.

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Conclusion

This blog aimed to provide a comprehensive overview of the essential aspects freelancers need to know about GST. Understanding the implications of Goods and Services Tax (GST)  for freelancers is crucial in navigating this dynamic landscape of taxation.

By being aware of the key elements, freelancers can effectively manage their tax obligations, avoid penalties, and maintain a streamlined financial workflow.

Furthermore, staying updated with any changes in GST regulations and seeking professional advice when needed will ensure freelancers remain compliant and optimise their financial strategies. This can help freelancers to thrive in an increasingly digital and interconnected economy.

FAQs

1. Is GST required for freelancers?

Yes, when their annual revenue surpasses Rs. 20 lakhs in India, freelancers must also pay GST.

2. Who can avoid GST registration?

A person who sells exempt products does not need to register for GST. GST does not also apply to agriculturalists. You do not need to register for GST tax if your yearly income is less than 20 lakhs.

3. How to register GST for a freelancer?

To register for GST as a freelancer, gather the appropriate paperwork and data, go to your local tax authority’s website or get in touch with them directly, fill out the application form with exact details about your business, submit it with the necessary paperwork, and wait for their approval.