GST for Freelancers

Freelancer is an individual who provides services on a contractual basis. Freelancer is not under any full time employment contract. The GST law as applicable to service providers is applicable to freelancers as well.

GST registration for freelancers

  1. Mandatory only if the value of services exceeds Rs. 20 Lakhs (Rs 10 Lakhs for special category states like Uttarakhand, Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura & Himachal Pradesh).
  2. The limit of Rs. 20/10 Lakhs is applicable even for inter-state and export services. i.e If the value of services exceeds Rs. 20/10 Lakhs including interstate services and exports only then registration is mandatory.
  3. A Freelancer can voluntarily choose to register even if turnover is less than Rs. 20/10 Lakhs. Upon voluntary registrations all compliances like filing returns and collection of tax is applicable like a registered service provider.

Documents required for GST registration for freelancers

  1. Photograph
  2. PAN and Aadhaar card
  3. Identity and address proof
  4. Latest bank account statement or cancelled cheque
  5. Electricity or telephone bill
  6. The rental agreement for office premises
  7. No objection certificate

Export of Services for Registered freelancers

Services rendered to person located outside India is considered as Export and no GST is applicable on such services. However, below points are to be kept in mind for export services:

  1. File Letter of Undertaking (LUT for freelancers). LUT is very simple to file
  2. If LUT is not filed, you can pay taxes and go for refund. This is not advisable as working capital would get blocked as the refund process will take sometime
  3. Payment must be received in Convertible Foreign Exchange (US Dollars, Pounds etc). Ensure to collect FIRC (Foreign inward remittance certificate) from your banker. It is mandatory for proving export of services.
  4. Few payment gateways like Paypal, Payonner, Stripe provide FIRC along with payments. Ensure to collect FIRC from other payment gateways if you do not receive.

Composition Scheme for freelancers

  1. Freelancers can avail composition scheme if turnover of less than Rs. 50 lakhs.
  2. GST rate is 6% in place of applicable GST rate on the service
  3. No benefit of input tax credit.
  4. Cannot opt for composition scheme if services rendered to a person in another state or in another country.

GST returns for freelancers

  1. Freelancer will have to file a total of 25 GST returns in a year if he is registered as a normal taxable person (File GSTR-1 & GSTR-3B Monthly and GSTR 9 annual return)
  2. Freelancer with turnover upto 5Cr can opt for filing quarterly returns. In that case, total of 9 GST returns needs to be filed (Additional of 8 GST PMT-06 return needs to be filed for first 2 months of the quarter)