How GST Impacts Freelancers?

The pandemic opened gates to new opportunities and accelerated existing trends in remote working. Post-pandemic, working from home has become the new norm, and demand for freelancers has been constantly growing. Freelancers are persons who work on multiple projects, with different clients and are not employed by anyone. They work on a contractual basis on specific assignments in lieu of contractual fees.

Even though Freelancers are recognized for their flexibility, they may feel so constrained by the individual assignments that they neglect their finances and tax implications. GST is one such aspect that is overlooked by many. Even one is a freelancer, it’s important to know if GST is applicable to them or not.

Here are a few things freelancers must know about GST:

Whether or not a Freelancer is required to register for GST?

It is not mandatory that all independent contractors obtain GST registration. The following situations necessitate registration under the GST:

if the turnover exceeds Rs. 20 lakhs/10 lakhs (for North-Eastern states).
if a person provides services covered under OIDAR (Online Information and Database Access and Retrieval Services). These include:

Online advertising for a beneficiary
Providing cloud-based services.
Providing non-physical products such as movies, music, software, books, etc. via internet.
Providing facts, figures, and other information or undertaking data research for a beneficiary online
Video games, played over the internet and involving interaction with other online players.

In case of export of services, The Integrated Goods and Service Tax Act mandates mandatory registration

Voluntary Registration for GST

A freelancer has an option to register voluntarily under GST, even if his/her income is less than the threshold limit of Rs. 20 lakhs/10 lakhs.

Moreover, if a freelancer voluntarily registers under GST, he or she would be required to comply with all the applicable laws and pay GST. However, according to tax experts obtaining voluntary registration would increase the overall compliance burden.

GST registration would help when working with B2B customers as they would not work with non-registered customers. Obtaining GST registration would also help to reduce the input GST costs which a person might incur on procurements, which would then be available as credit to such freelancers.

GST Rates on Freelancing Services

The GST rates applicable to the freelancers are 0%, 5%, 12%, 18%, and 28% depending upon the type of service provided. If nothing is specified, a rate of 18% would be applicable on the services.

The Bottom Line

A freelancer is similar to a service provider and hence is bound by the GST Act and is required to obtain GST registration and file returns. It is better to obtain clarity regarding the services being provided and whether they fall under the ambit of GST. GST registration would allow your business to function legitimately and positions your brand as a trustworthy, authentic one.

Text within this block will maintain its original spacing when published

JJ Tax is here to ease out the process for you and manage all the compliance related tasks from registration to filing. Taxes now made hassle free with JJ Tax.

Tune in to our podcast, FunnTaxx, wherever you get your podcast.

Amazon music, Spotify , Jio Saavan and Gaana .

#RelaxwithJJTax