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The Simplest Guide to GST for Freelancers in India
By Ritika Tiwari / July 13, 2017 / Comments: 16

There has been a lot of confusion about GST for freelancers in India. I have personally received a lot of emails from freelance writers asking me about the same and I didn’t want to pen down an article about it without being 100% sure of all the facts.



That is why this article is rather delayed, but all the information has been cross-verified by a number of CAs around the country so you can be sure of it. I have tried my best to put it in as simple terms as possible.

What is GST?

Goods and Services Taxes which is a composite tax and has replaced all the other types of taxes for greater clarity. Yes, it is applicable for the services industry as well.

How much GST would a freelancer charge?

Since it is replacing the service tax for a freelancer, the GST charges will be 18% of the total bill amount. Every invoice that you create will need to have 18% GST marked on it.

Is GST registration necessary for a freelancer?

Whether you are a freelance writer or a freelancer providing some other services. GST registration depends on the following factors:

  • Do you only have clients residing in the same state as you and you have an annual revenue of less than 20 lacs

Registration not required.

  • Do you have an annual revenue of more than 20 lacs, despite of where in India your clients are located?

Registration required.

  • Do you have clients in a number of states across India?

Registration required, despite your income threshold.

 

As you can see, most freelancers have clients all over the country, that’s the whole idea behind freelancing. But that means, despite what you earn for freelancing, you will have to register for GST if your client is in a different state than you.

So, if a freelancer pays taxes in the state of Maharashtra but is working with a client registered in Tamil Nadu, then he will have to register for GST despite his annual income.

Should I charge GST from foreign clients as well?

No, you don’t need to charge GST on foreign client invoices. If the payment to your bank account is coming through a foreign bank account, then there is no need for any extra 18% GST charges. (Same applies to PayPal)

Who will pay for GST charges?

Your clients will and then you will pay the same to the government. You clients can claim it as tax credit when they file for taxes so that’s a win-win for everyone. Please do not pay for the GST charges yourself, even if your clients ask for a concession, because you will have to pay them back and your clients will still get tax credit for it.

How many returns would I have to file in an year?

37 in total. One annual return, and 3 returns per month.

So, that makes it 3×12 + 1 = 37 in total. Don’t worry, you don’t have to manually file these returns. You just have to ensure all your paperwork is in the right place and you have all your invoices with you, rest your CA can handle.

Will there be a change in invoicing?

Not really. You just have to ensure every invoice has a unique invoice number (I recommend using an invoicing software for that) and you have mentioned the GST charges along with your GST number in the invoice.

What if I don’t want to file for GST?

All this can be a lot for a freelancer who is still trying to find his ground and I get it. If I was asked to do so much work when I was starting out as a freelancer, I would have lost my mind. But if your long-term vision is to become a successful full-time freelancer, then you cannot run away from the government taxes.

Not to mention, if your client has filed for GST, deducting your TDS, and sending regular payments your way, then the government already knows you should have filed for GST and you haven’t. That is because your client lists you down as a freelancer or contractor when they file their TDS papers. Now if their bank account and yours is in a different state and your bank account is linked to your PAN card, then there is really no running from it.

At the end, either you would have to pay those 18% GST charges from your pocket or your client will forced to pay those even without you charging for it.

What should I do if my client doesn’t want to pay for GST charges?

First of all, you have to explain it to your client that they can get a tax credit for it when they file for taxes. So, the only clients who wouldn’t want to pay for GST charges are the ones who aren’t paying taxes or aren’t interested in paying you.

Will it affect my overall income?

Not at all. The extra GST charges are paid by your clients and you will still be getting paid exactly what you are charging as a freelancer.

The next step

Contact a CA

Contact an experienced CA who has been working with freelancers or solo entrepreneurs so that he exactly knows your requirements and doesn’t confuse you more.

File for GST

GST registration are still going on and will continue until the next 3 months. So, you can register for them any time. Once you do register, you will get an ARN number and after a week or two you will get the main GSTN. Once you receive the ARN number, you can start charging 18% GST and mention that ARN in the invoice. Though, you will have to regenerate all those invoices with your GSTN when you receive it.

Use an invoicing tool

If you think you can do all this manually in Microsoft Word or Excel, then you are greatly mistaken. Opt for an invoicing tool which supports adding taxes as well and generates unique invoice numbers so that you can easily edit or download the invoices for your own records.

Have any questions about GST for freelancers in India? Anything I forgot to mention? Feel free to comment below.

 

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16 Comments on "The Simplest Guide to GST for Freelancers in India"

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Sandipan Banerjee
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Sandipan Banerjee
2 days 23 hours ago

Hello Ritika,
Thanks for the information. But I guess, Freelance Journalists are exempted from GST.

Source: http://www.cbec.gov.in/resources//htdocs-cbec/gst/services-booklet-03July2017.pdf (Serial number 51 of ‘Nil’ section).

Can you please provide more info on this? Also though an ‘Independent Journalist’ does not have to pay GST, but do he/she still require a GSTN?

Any update on this can be very useful for the freelance journalist community.

Sayan Kundu
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Sayan Kundu
4 days 11 hours ago

Hello Ritika,
Thank you for the most simplified guideline for the freelancers in India. But I have a couple of questions.
1) If I do business only with the foreign clients and my yearly turnover is below 20 lakhs, do I need to register for the GST?
2) If I am still doing business with foreign clients and my turnover crosses 20 lakhs, do I then need to register under GST?

I will be waiting for your reply and thank you in advance.

Naad
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Naad
4 days 11 hours ago
Your article answers most of the queries. I am working as freelancer with one of Software Company Client and work on Contract. Our Bank accounts are in same city. My Query: 1) My overall income for year does not exceed 12 Lacs, I am eligible to pay GST? 2) Client used to cut 10% TDS on every invoice that I make 3) Now with GST, Client says to cut 10% TDS and 18% GST? Is it correct? My Understanding is, Client can deduct 10% TDS and pay the invoice and as I am under 15 Lac, I must not bear… Read more »
Ram Gupta
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Ram Gupta
5 days 4 hours ago

I work on upwork and upwork converts and sends money to my account in INR (all my clients are abroad) does GST apply to me? I have receipts from that xx $$ converted to YY INR and send to zz account. Like paypal odesk sends in INR.

Mukesh
Guest
6 days 14 hours ago
This is very well written. Thanks for this. Couple of clarifications. 1) If you have a combination of income from foreign and Indian clients, you need to only calculate revenue from Indian clients for the threshold of Rs. 20L? 2) I may have clients from only one state for now, but tomorrow I might get from another. Do I register for GST then or should I do that now itself? If I can register afterwards, then do I register before raising the invoice and hence irrespective of whether I actually get paid or not? 3) Similarly, what if I am… Read more »
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