Simplest guide for GST on freelancers

GST GST on freelance income freelancing tax GST on freelancer
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When the GST or Goods and Services Tax was introduced in July 2017, it replaced the VAT & Service Tax. While it brought in uniform tax laws for large and small businesses alike, most businesses struggled with figuring out if they needed GST registration. Today, much of the haze has lifted and most businesses have some measure of clarity.

As a freelancer, who has not registered under a business name, you may wonder why you need to worry about GST. However, by its very definition, GST does apply to service providers. It’s a good idea therefore to evaluate if you need to pay the GST on freelancers.

GST on freelancers

GST registration for freelancers—when would it apply?

  • If you are a freelancer whose turnover in a financial year crosses the threshold limit of Rs. 20 lakhs, you’d be required to pay GST.
  • If you are a freelancer who lives and functions from any of the North-eastern States, you’d cross the threshold limit at Rs.10 lakhs and would therefore have to opt for GST.
  • Irrespective of the aggregate turnover, if you are receiving payment for services under OIDAR (Online Information and Database Access and Retrieval), GST registration is mandatory. OIDAR includes activities like advertising on the internet, delivering cloud-based services, providing intangible products via the internet like e-books, entertainment (music, movies, online gaming), software, or any other data in electronic form like video tutorials.
  • If you are a freelancer exporting services over Rs. 20 lakhs, you’d need to pay GST. For example, if you’re designing a website for a US-based company and the foreign currency you receive as payment exceeds Rs. 20 lakhs, you’d need to register for GST.
  • Things to remember

    How the GST affects your income:

    The GST on freelancers affects the buyer and not the freelancer or service provider. This means that you charge the extra amount to your client. While it’s possible that some clients will opt for a provider who does not charge GST, most of them tend to view GST registration as an indicator of your credibility.

    Default can result in penalty:

    Since all accounts are Aadhar and PAN linked, the Government can easily track your income through TDS deductions and payments made to your bank. Defaults can result in penalties and damage your credibility.

    Voluntary registration—the good and the bad:

    Even if your annual turnover is less than Rs. 20 lakhs you can opt for voluntary registration. This would allow you to accept projects from foreign clients, without worrying about possible defaults.

    GST filing:

    Once you receive your GST identification number, you need to file regularly, irrespective of your annual turnover. Delays in depositing GST would attract interest.

    All payments will need to be made online. If your payments exceed Rs. 10000, the GST needs to be deposited with the government on a quarterly or monthly basis. Annually, a total of 37 returns would need to be filed—three monthly returns and one annual return.

    To conclude, there are certain conditions under which GST is beneficial. Our recommendation would be to wait and watch before deciding if you need to register. In the meanwhile, boost your career by participating in this exciting contest.

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