Individual freelancers, partnership firms, LLPs, and corporations are all subject to the same GST rules. These guidelines apply to self-employed professionals who work for a single client or a group of clients. You do not have to pay goods and services tax if you are a salaried employee (GST). However, if you work as a freelancer (lawyer, architect, designer, developer, salesperson, etc.), you may be required to pay GST in certain circumstances.

Who is a freelancer?

A freelancer is someone who works on a per-job or per-task basis and is self-employed. It could also be on a contract basis, usually for a limited time. Freelancers work on many projects for various clients at the same time. Because a freelancer is not an employee of any organization, he or she is not covered by the employer’s benefits or perks.

When may a freelancer file a GST return?

We know that the GST law requires mandatory registration in the following situations:

  • This ad is considered profitable, so please report it. When the company’s revenue hits Rs. 20 lakhs,
  • When a company’s turnover hits Rs. 10 lacs, it is considered profitable.
  • For OIDAR-covered services (Online Information and Database Access and Retrieval).
  • Any inter-state supply of goods/services involves GST registration in the case of service exports. The export of services is referred to as “zero-rated supplies” and qualifies as an “inter-state supply” under the IGST Act.

The following are some guidelines for persons who supply services to a single or several clients.

Registration on a voluntary basis

A person can register for GST even if his or her yearly sales are less than Rs 20 lakh / Rs 10 lakh (in northeastern states). If a person willingly registers, he will be subject to all GST regulations. To put it another way, he is responsible for collecting and paying GST, as well as filing returns and other documentation. It’s a good idea to register voluntarily if a person has a lot of GST-eligible expenses.

GST rate for freelancers

The following items have an 18% GST rate. GST comes in a variety of forms.

  1. Accounting/Bookkeeping
  2. Call center or customer care
  3.  Data entry
  4.  Designing services
  5. Software/App Development
  6. Technical services
  7. Language Translation
  8. Management/Consultancy Services
  9. Marketing Services
  10. Domain and hosting
  11. Voice over

Services on Export

You are not required to charge GST if you have submitted a Letter of Undertaking for the export of services (LUT). If you haven’t submitted a LUT, you’ll have to charge GST and then fill out GST Refund paperwork to get your money back. Because LUT is a simple form that does not require a lot of information, it is recommended that you submit it instead of requesting a refund.

Scheme of composition

There is a composition program for enterprises with a turnover of less than Rs. 50 lakhs. You can pay GST at a rate of 6% instead of the actual GST rate on the service you provide (which is normally 18%) under this plan, but you won’t be able to claim the input tax credit. If you provide services to someone in another state or country, you cannot register under the composition scheme.

Input Tax credit

An input tax credit is the amount of GST paid on purchases that is allowed as a reduction from the GST owed to the government. There are no specific provisions for the input tax credit for freelancers. They can claim GST paid as an input tax credit on all business expenses, including rent, phone bills, computers, and laptops, with the exception of motor vehicles and food bills, which are not eligible for ITC.

Tax collection at source under GST

Section 52 of the CGST Act requires e-commerce companies to collect TCS from individuals who offer goods or services through them. TCS is required to be collected at a rate of 1% on all payments made via them for a freelancer based in India. It must, however, be collected solely from GST-registered persons. Upwork also charges a 1% TCS to all freelancers, regardless of whether they are GST registered or not.

Documents needed for freelancers for GST Registration

The following are the documents a freelancer will need for GST registration

  • A copy of your PAN and Aadhaar card
  • Your photo
  • Identification and residence evidence
  • A recent bank account statement or a cancelled check
  • Your digital signature
  • Electricity or telephone bill
  • Office lease agreement
  • No objection certificate

What happens after you’ve registered for GST?

To stay on the right side of the law, make sure you continue the process after you’ve filed all of the essential paperwork and done all of the required formalities.

You must include the GST amount to the total billed amount when creating an invoice. Thus, if your billed amount is Rs. 25,000 for one client, the total amount that your client must pay will be Rs. 29,500 after adding GST at the rate of 18%. While you collect GST, you must deposit it with the government when filing your GST returns.

Payment terms and services for freelancers

Freelancers who have registered for GST are subject to different payment terms and conditions.

  • GST rates on your services might range from 0% to 5 percent, 12 percent to 18 percent, and 28 percent, depending on the type of service you perform. If no specific percentage is specified, you must charge your clients GST at the rate of 18%.
  • After receiving your GST identification number, you must file GST on a monthly and annual basis. This is true regardless of your existing annual revenue.
  • All payments must be made online. There will be 37 forms to file each year: three monthly filings and one annual form.
  • You may have to pay a fine if you do not deposit the GST proceeds on time.
  • You must file a monthly summary return under GSTR 3B after paying all applicable taxes.

Is it necessary for freelancers to register for GST if they issue invoices?

  • Your clients will expect you to raise invoices if you work as a freelancer. When you send an invoice to your client, he or she may deduct 10% TDS from each invoice.
  • Even if you raise invoices, you are not required to register for GST if your income exceeds Rs. 20 lakh or Rs. 10 lakh (for NE residents).
  • If you’re registered for GST, however, your invoice should follow the GST rules.
  • On the invoice, you must provide your name, address, GSTIN, GSTIN of your client, Service Accounting Codes (SAC), date, amount, and signature.
  • Your clients must pay the required GST, which is added to the cost of your services. After that, you’ll have to pay the same amount to the government. Because your clients may claim it as a tax credit when they file their taxes, it’s a win-win situation for everyone.

Which GST rates do freelancers have to pay?

Depending on the type of service supplied, freelancers are subject to GST rates of 0%, 5%, 12%, 18%, and 28%. If there isn’t a set fee for the service you’re providing, you’ll have to charge your customers 18 percent GST.

What is the maximum number of GST returns a freelancer must file?

If a freelancer is registered as a regular taxable person, he must file 25 GST returns every year. More information about GST return filing can be found here.

What are the penalties for filing returns late?

  • Rs. 200 late fee will be charged.
  • There will also be an annual interest rate of 18 percent. The taxpayer will determine this based on the amount of tax to be paid.
  • If the tax is not paid, a minimum penalty of Rs 10,000 would be imposed.
  • The highest penalty for delinquent tax is 10% of the tax amount owed.

For many freelancers, GST filing might be an overwhelming task. Hiring an expert from PhoenixTax the best GST consultant in Tambaram, Chennai will assist you in ensuring that everything is in compliance with current legislation.