GST registration for freelancer

Who is Considered a Freelancer Under GST?

Freelancers are individuals who undertake multiple assignments without being employed by a single employer. They work on a contract basis for specific projects and receive payments accordingly. Since freelancers provide services, the GST rules applicable to service providers also extend to them.

Is GST Registration Mandatory for Freelancers?

As per GST laws, freelancers must register under the following circumstances:

• If their total turnover exceeds ₹20 lakhs in a financial year (₹10 lakhs for North-Eastern states).
  
  

• If they provide services classified under Online Information and Database Access and Retrieval (OIDAR) services.
  
  

• If they export services, as any inter-state supply of goods or services mandates GST registration. Since exports are categorized as “zero-rated supplies,” they qualify as inter-state supplies under the IGST Act and require GST compliance.
  
  

What are OIDAR Services Under GST?

OIDAR services refer to services delivered over the internet with minimal human intervention. These include:

• Online advertising services
  
  

• Cloud-based services
  
  

• Distribution of e-books, music, movies, software, and other digital content
  
  

• Data or information services provided electronically through a computer network
  
  

• Online gaming services
  
  

Freelancers providing such services need to adhere to GST rules and register accordingly.

Is the Composition Scheme Applicable to Freelancers?

As per the GST Act, a special scheme was introduced in March 2019 for service providers with an annual turnover of less than ₹50 lakh. This scheme follows similar compliance rules, conditions, and benefits as the Composition Scheme under Section 10 of the CGST Act. Under this scheme, freelancers can opt to pay a nominal GST rate of 6% (3% CGST + 3% SGST) on their quarterly supplies. Based on these provisions, freelancers with lower turnover can benefit from this simplified tax structure.

Applicable GST Rate for Freelancers

The GST rates applicable to various services are 0%, 5%, 12%, 18%, and 28%, depending on the service category. If no specific rate is mentioned for a particular service, the default GST rate is 18%.

Invoicing Rules for Freelancers

Freelancers must issue invoices that comply with GST regulations. The invoice should include the following details:

• Name and address of the supplier (freelancer) and recipient
  
  

• GSTIN of both parties (if applicable)
  
  

• Service Accounting Code (SAC)
  
  

• Invoice date
  
  

• Value of the service provided
  
  

• Signature of the freelancer
  
  

Proper invoicing ensures compliance with GST laws and allows clients to claim Input Tax Credit (ITC) where applicable.

Is the Service Provider Eligible for Input?

Just like any other GST-registered taxpayer, a freelancer is entitled to claim input tax credit (ITC) on services utilized in providing their own services.

For instance, if a freelancer incurs expenses on a laptop, electricity, telephone, or other necessary utilities while delivering taxable services, they can claim ITC on those expenses. Additionally, the GST charged by the freelancer can be claimed as input tax credit by the recipient of the service. This ensures that the burden of GST does not fall on the freelancer, nor does it impact their earnings, as the tax amount is collected from customers.

Is It Necessary to File Returns?

A freelancer is required to file a total of 25 returns annually, consisting of two monthly returns and one annual return. To explore the details of return filing, click here.

Even if a freelancer chooses not to register for GST and collect tax, the government can still track their turnover. This can happen through TDS deductions made by clients while making payments or by monitoring transactions in bank accounts. Since all financial accounts are linked with Aadhaar and PAN, it is challenging to evade legal scrutiny.

It is evident that freelancers are obligated to comply with GST regulations, and failure to do so may lead to penalties. To ensure proper compliance, seeking expert guidance for GST registration, return filing, and invoicing is advisable.