GST registration for freelancers: 9 Points guide to GST compliance for freelancers under GST

1.0 Introduction

With GST finally, here we have seen massive changes not just in our economy but in our day to day life as well. With this sudden change, we all were very confused. Initially, it resulted in chaos but slowly and steadily we have become more aware of it. We are familiar with the tax now then we were earlier.

However, a lot of freelancers contact us on daily basis regarding the taxability under GST. Freelancers are the people which don’t care about the taxes initially, however, since the government is getting strict day by day, they don’t want to take any chance.

Hence, this article today will cover all the areas concerning the position of freelancers under GST. After the implementation of the tax, there was a lot of chaos about GST for freelancers in India.

Let us discuss important compliances in relation to freelancers.

2.0 Who are freelancers?

In simple terms, a freelancer is a person who works for/with an organization on a contract basis rather than working regularly as an employee. Hence freelancer is anyone who has not a single employer with regular work.  He is someone who works with different companies all at once.

A freelancer has the freedom to choose among companies, employers, projects etc. Freelancers are self-employed and not committed to a single employer for the long term.

Freelancing is not restricted to a particular field or profession. A freelancer could be a writer, actor, web designer, IT professional, app developer, music composer, teacher etc. Freelancers are the provider of services hence they will always come under the service sector.

3.0 GST exemption for freelancers

Any person including freelancer can enjoy a basic exemption of Rs.20 lakhs if he is providing services within a state. The limit applies to every person if the total turnover is not more than Rs.20 lakh in a financial year.

So it is not at all mandatory for freelancers in any field to register if their turnover is below 20 lakhs in a year. For Eg, if you are a freelancer earning Rs.12 lakhs in a year, you are not required to register under GST.

However, for some states (north eastern states including Himachal Pradesh, Jammu and Kashmir, Uttarakhand) the turnover limit is Rs.10 lakh.

4.0 When GST registration is mandatory for freelancers

The following are the scenarios where a freelancer has to register under GST:

• Crossing the threshold of GST: If you are a freelancer with turnover above 20 lakhs in a year then you have to register yourself under GST like everyone else.

• Making any Interstate supply: When you are providing your services or supplying goods from one state to another irrespective of the turnover, you shall be liable for GST registration.

         For if you are a writer based in Delhi and you are writing a content for an organization in Mumbai then you are liable to register for GST as you are doing inter-state supply.

         It is important to note that once you have GST registration then the exemption of 20 lakh shall cease to apply and you shall have to raise tax invoice for every new transaction thereon.

• Export of goods or services under GST: If you are the exporter of services, then also it is mandatory to register under GST.

5.0 Whether composition scheme can be availed by freelancer services

Any business in India can voluntarily opt for composition scheme if they have turnover not more than 75 lakhs rupees. Composition scheme extends some important benefits to small scale business like fewer compliances etc.

However, composition scheme does not apply to services except restaurant services. Hence, if you are freelancer i.e. IT professional or designer then GST composition levy shall not be applicable to you.

6.0 Tax invoice by freelancers under GST

As per GST law, a tax invoice is required to be issued for every supply of goods and services. Further, it is mandatory to issue invoice properly otherwise the penalty of 25000 may be levied upon the person responsible for supplying the services.

The tax invoice should contain the following details:

• Name, address, and GSTN of the supplier
• Invoice number
• Date of invoice
• Name, address and GSTN (if registered) of the recipient
• If the recipient is unregistered and value of supply is more than Rs 50,000 then the name and address of the person has to be mentioned
• HSN or Sac code of the goods or services
• Value of goods or services provided.
• Rate of tax on each item
• Whether the tax is payable on reverse charge
• Signature of the supplier or his representative

You may use free GST invoicing software for export invoices

7.0 GST tax rate for freelancer services

GST has provided 5 slabs for tax rate which are as follows: 0%,5%, 12%, 18% and 28%.

It has also provided the fixed rate for each service. When the slab is not fixed in a field or the field is not mentioned then that service will come under the general slab of 18%. Hence the tax rate of freelance services is 18%.

However, kindly consider the slab of tax rate first because your services may have the separate line item for tax.

8.0 Services outside India to be treated as export of service

To know whether you are covered under the ambit of export of services or not, you need to check the definition of export of services first. Let us produce the definition of service for ease:

“Export of services is defined as any supplier in India with the recipient of services located outside India and the place of supply is outside India and the consideration should have been received in convertible foreign exchange.”

In other words, if you being a resident of India are doing freelance work for someone outside India and getting paid in foreign exchange then that will be considered as export of services.

9.0 What are OIDAR services and why it is important for freelancers?

OIDAR are the services which are defined in CGST act as an online information and database access or retrieval services. In other words, these are the services we enjoy on the internet only. These services are only comprised of online work

These services will include –

• Advertising on the internet
• Providing cloud services
• E-books, movies. Music software, television shows etc\
• Digital data storage
• Online gaming

For the services mentioned in OIDAR registration of GST is compulsory and mandatory. Hence if your freelancing service comes under this concept then it becomes necessary for you to register for GST.

10.0 Conclusion

Being a freelancer can be difficult as you work alone on your own. It can be easy if you are not dependent on anyone. Hence getting as much knowledge about GST will help you out in the long run.

So, if you are a free a freelancer getting confused about GST registration the email us at info@hubco.in we will not just provide you information but will help you in registration as well.

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