A freelancer is an independent service provider who offers services on a contract basis, hourly rate, or periodic schedule. These services can be delivered directly to clients in India, through freelance platforms like Upwork or Freelancer, or even to international clients. Freelancers typically offer professional services such as website development, app development, graphic design, management, accounting, and consultancy.

The GST rules for freelancers are the same as those applicable to individuals, partnership firms, LLPs, and companies. These regulations also apply to self-employed professionals, regardless of whether they serve a single client or multiple clients.

GST Registration Requirement for Freelancers

📌 Earning up to ₹20 lakh in a financial year:
If a freelancer’s total service revenue does not exceed ₹20 lakh in a financial year, GST registration is not required. This exemption applies irrespective of whether the services are provided within the same state, across states, or even outside India (export of services).

Under Section 24(1) of the CGST Act, 2017, any person making an inter-state taxable supply (whether goods or services) is mandatorily required to register under GST. However, Notification No. 10/2017 – IGST provides an exemption for service providers whose annual turnover is below ₹20 lakh.

For professionals and freelancers registered in specific north-eastern and special category states, this turnover limit is reduced to ₹10 lakh. These states include:

✅ Uttarakhand
✅ Arunachal Pradesh
✅ Assam
✅ Jammu & Kashmir
✅ Manipur
✅ Meghalaya
✅ Mizoram
✅ Nagaland
✅ Sikkim
✅ Tripura
✅ Himachal Pradesh

Voluntary GST Registration for Freelancers

Even if GST registration is not mandatory, freelancers can voluntarily register to:
✔️ Claim Input Tax Credit (ITC) on GST paid for business expenses
✔️ Receive cash refunds for GST paid on input services when exporting services

🚨 Note: The GST exemption limit of ₹40 lakh applies only to goods. For services, the threshold remains ₹20 lakh (₹10 lakh for special states).

Mandatory GST Registration Scenarios for Freelancers

📌 1. When total earnings exceed ₹20 lakh (₹10 lakh for special states) in a financial year
✅ GST registration becomes mandatory once annual revenue crosses this threshold.
✅ Even if 100% of services are exported, registration is still required.
✅ A Letter of Undertaking (LUT) must be filed to avoid paying GST on exports and only report it in GST returns.

📌 2. When importing services for business use
✅ If a freelancer purchases services from a foreign supplier, GST registration is required.
✅ Examples include:

• Hiring services via Upwork, Fiverr, Freelancer, etc.

   

• Subscribing to tools like Canva, Adobe, or other SaaS platforms that don’t charge Indian GST.
  ✅ To determine if a purchase qualifies as an import of services, check the supplier’s invoice:

   

• If the invoice does not include an Indian GST number, GST registration and payment under Reverse Charge Mechanism (RCM) may be required.

   

• If GST is charged and the supplier is registered in India, RCM does not apply, and GST registration is not needed.

Why Should Freelancers Register for GST?

Registering under GST allows freelancers to:
✔️ Legally comply with tax regulations
✔️ Claim Input Tax Credit (ITC) on business expenses
✔️ Enhance credibility when dealing with clients
✔️ File GST returns and claim refunds on exports

KMG CO LLP GST Registration Services can help freelancers obtain a GSTIN (Goods and Services Tax Identification Number) seamlessly.

Documents Required for GST Registration

To register for GST, freelancers must provide the following documents:

📌 Personal Documents:
✅ Passport-size photograph
✅ PAN card copy
✅ Aadhaar card copy
✅ Identity and address proof

📌 Banking & Office Documents:
✅ Latest bank account statement or a canceled cheque
✅ Digital signature

📌 Address Proof for Business Location:
✅ Electricity or telephone bill
✅ Rental agreement (if office space is rented)
✅ No Objection Certificate (NOC) from the property owner

Registering for GST ensures smooth tax compliance and allows freelancers to operate without legal complications. ✅

Voluntary GST Registration: Impact and Benefits

Even if a business or individual earns less than ₹20 lakh (or ₹10 lakh in north-eastern states), they can still choose to register under GST voluntarily.

Once voluntarily registered, the individual or business must comply with all GST regulations, including:
✔️ Collecting and paying GST on taxable services
✔️ Filing regular GST returns
✔️ Maintaining proper records as per GST laws

Why Opt for Voluntary GST Registration?

Voluntary registration is particularly beneficial when businesses incur substantial expenses on which GST is charged.

For instance, if a business runs online advertisements on Google, 18% GST is applicable on ad spend.
✔️ Without GST registration → The GST paid cannot be claimed as a credit.
✔️ With GST registration → The GST amount can be claimed as Input Tax Credit (ITC) and later used to offset tax liabilities. Additionally, a GST refund may be claimed under specific conditions.

Types of GST Registration

Businesses can choose between two types of GST registration:

1️⃣ Regular Scheme
2️⃣ Composition Scheme

The Regular Scheme has no restrictions, while the Composition Scheme is designed for smaller businesses with certain limitations.

1. Regular Scheme

✅ A registered person charges GST (usually 18%) to customers and remits it to the government.
✅ The customer can claim Input Tax Credit (ITC) for the GST paid.
✅ There are no restrictions on turnover or inter-state/international transactions under this scheme.

2. Composition Scheme

✅ Designed for service providers with annual turnover below ₹50 lakh.
✅ Instead of the standard GST rate (usually 18%), businesses pay a reduced GST rate of 6%.
✅ Cannot collect GST separately from customers—it must be paid from the business’s own funds.
✅ No Input Tax Credit (ITC) benefit for the business or customers.

🔹 Who benefits from the Composition Scheme?
Small service providers serving local, unregistered customers, such as:
✔️ Dry cleaners
✔️ Salons
✔️ Small repair shops

🚨 Important Note: Businesses providing services to clients in another state or country cannot opt for the Composition Scheme. They must register under the Regular Scheme instead.

By understanding these GST registration options, businesses can choose the best approach based on their operations and tax obligations. ✅

GST Rate on Freelancing Services

The GST rate for freelancers depends on the type of services they provide. Under the Regular Scheme, most freelancing services fall under the 18% GST slab.

Common Freelancing Services with 18% GST Rate

✔️ Accounting & Bookkeeping
✔️ Software & App Development
✔️ Technical Services
✔️ Call Center & Customer Support
✔️ Data Entry Services
✔️ Graphic & Web Designing
✔️ Digital Marketing & SEO Services
✔️ Domain & Hosting Services
✔️ Voice Over & Dubbing Services
✔️ Language Translation Services
✔️ Business Management & Consultancy Services

Since most freelancing services are provided online, they generally attract an 18% GST rate.

For official confirmation, freelancers can refer to the GST rates list available on the Government of India’s website:
🔗 GST Rate List – CBIC Official Website

Understanding the correct GST rate ensures freelancers comply with tax regulations and charge the applicable GST to clients. ✅

Input Tax Credit (ITC) refers to the GST paid on purchases, which can be deducted from the GST payable to the government.

How ITC Works for Freelancers?

Freelancers, like any other GST-registered taxpayers, can claim ITC on goods and services used for providing their services.

They can avail ITC for:
✔️ Fixed assets purchases → Laptops, office equipment, furniture
✔️ Operational expenses → Internet bills, telephone bills, office rent
✔️ Consumable services → Software subscriptions, cloud storage, co-working spaces

ITC for Export of Services

If freelancers provide services to clients outside India (export of services), they have two options:
1️⃣ Use ITC to offset GST liabilities
2️⃣ File an LUT (Letter of Undertaking) and claim a GST refund using Form GST RFD-01

ITC for Clients

If a freelancer charges 18% GST on services, the client (recipient of the service) can also claim this GST as ITC, reducing their tax liability.

Purchases Not Eligible for ITC

Certain expenses do not qualify for ITC, including:
🚫 Motor vehicles (unless used for business purposes like transportation services)
🚫 Meal & food expenses
🚫 Construction materials

Understanding ITC rules helps freelancers reduce their GST liability and operate in a tax-efficient manner. ✅

Invoicing Guidelines for Freelancers

Freelancers must follow general invoicing rules, as there are no specific invoice requirements exclusive to them. An invoice should include all essential details, such as:

✔️ Service provider details – Name, address, and GSTIN
✔️ Recipient details – Name, address, and GSTIN (if applicable)
✔️ Service Accounting Code (SAC)
✔️ Invoice date and number
✔️ Description and value of services provided

Invoicing for Export of Services

If you are exporting services under LUT (without charging GST), you must include the following note on your invoice:
🔹 “Export of Services without payment of GST under LUT filed on 19th March 2021 having ARN AD080421001248J”

Mandatory SAC Code for B2B Invoices

Since April 1, 2021, if you issue an invoice to another business registered under GST, you must include the Service Accounting Code (SAC).

Proforma Invoice for Freelancers

Freelancers often use a Proforma Invoice to provide an estimated cost to clients. The Final Invoice is issued after the contract is finalized.

Foreign Currency Invoice for Freelancing Services

When working with international clients, freelancers usually issue invoices in foreign currency. However, for GST return filing, income must be reported in Indian Rupees (INR).

Recommended Procedure:

1️⃣ Issue the invoice in the foreign currency to your client.
2️⃣ Convert the invoice amount to INR using the applicable exchange rate on the invoice date (approved by RBI). The rate can be found at: 🔗 FBIL Official Website (under the “Foreign Exchange” tab).
3️⃣ Use the converted INR value when reporting in GST returns and bookkeeping records.
4️⃣ Record any difference in exchange rates as Exchange Gain/Loss under direct expenses when the payment is received.

🚨 Note:
✅ No GST is applicable on exchange gains or losses.
✅ TDS at 1% under Section 194O is deducted by online platforms (e.g., Upwork) from the gross service amount as per the Income Tax Act, 1961.

🔗 Click here to download a Proforma Invoice in Foreign Currency for freelancers.

Export of Services under GST

For exporting services, freelancers are not required to charge GST if they have filed a Letter of Undertaking (LUT). However, if LUT is not filed, GST must be charged on invoices, and a refund can be claimed by submitting GST Refund forms. Since LUT filing is simple and requires minimal details, it is recommended to file LUT instead of opting for the refund process.

Prerequisites for Export of Services:

✔️ Client must be located outside India.
✔️ Service provider must be in India.
✔️ Payment should be received in convertible foreign currency.

• This does not mean the freelancer must receive foreign currency directly.

   

• Banks generally receive payments in USD and convert them into INR before crediting them to the freelancer’s account.

   

• To prove export of services, freelancers must obtain a Foreign Inward Remittance Certificate (FIRC) for such transactions.

   

Providing Services via Upwork, Fiverr, Freelancer, Guru, etc.

There is no difference in GST provisions whether freelancers provide services through online platforms or directly to clients.

GST Taxability Based on Client Location:

📌 If the client is outside India:
✅ The service is classified as export of services under GST.
✅ Freelancers must retain the FIRC for remittance proof.
✅ Many online platforms, such as Upwork and Freelancer.com, offer direct bank transfers for fast payments but do not provide FIRC.
✅ For proper documentation, freelancers should consider wire transfers or payment methods like PayPal or Payoneer, as they provide FIRC.

📌 If the client is in India:
✅ GST is applicable because the service is not classified as an export.
✅ Freelancers must charge GST on invoices.

⚠️ Important Note:

• If services are provided via Upwork, Fiverr, or Freelancer.com, the GST liability falls on the freelancer, not the platform.

   

• If the client is based in India, freelancers must charge GST even if payment is processed through an international platform.

   

Reverse Charge Mechanism (RCM) for Freelancers

If a freelancer provides services to foreign clients via platforms like Upwork or Freelancer.com, they must register under GST (regardless of turnover) because they are liable to pay GST under Reverse Charge Mechanism (RCM) on the platform’s service fees.

Why does RCM apply?

• The service fees charged by these platforms are considered import of services under GST.

   

• These services do not fall under the definition of “intermediary services” as per the IGST Act.

   

🔹 Example:
✔️ Upwork’s commission falls under RCM because Upwork does not charge GST on its service fees.
✔️ If freelancers use Payoneer or similar payment providers that do not charge GST on their service fees, they must discharge GST liability under RCM.

Foreign Inward Remittance Certificate (FIRC)

FIRC is an essential document required to prove receipt of payment in convertible foreign currency, which is a mandatory condition for classifying a transaction as an export of services under GST.

How to Obtain FIRC?

✔️ Wire Transfer Payments:

• If payment is received via wire transfer, the bank provides FIRC.

   

• Banks usually email the FIRC when crediting the amount to the freelancer’s account.

   

✔️ Payments via PayPal, Payoneer, Stripe, etc.:

• If payments are processed through international payment gateways like PayPal, Payoneer, or Stripe, the freelancer must obtain FIRC from the respective platform.

   

• Payoneer and Stripe provide FIRC along with the payment.

   

• PayPal started providing free FIRCs for all transactions beginning February 2021.

   

FIRC Requirement for GST Refunds

📌 If a freelancer applies for a GST refund, FIRC is a mandatory document.

• Without FIRC, freelancers cannot claim a refund for GST paid on exports or GST paid on input services used for exporting services.

Electronic Bank Realisation Certificate (eBRC)

A Bank Realisation Certificate (BRC) is an official document that verifies a company’s export transactions. It is particularly important for businesses seeking trade benefits under India’s Foreign Trade Policy.

The e-BRC is a digital version of this certificate, allowing exporters to generate and self-certify their BRCs. This became effective from 15th November 2023, as per Trade Notice 33/2023 dated 10-11-2023.

Difference Between FIRC and e-BRC

✔ Foreign Inward Remittance Certificate (FIRC):

• Covers all types of foreign remittances, including personal foreign transfers, consultancy fees, freight costs, etc.

   

• Used to prove receipt of foreign funds for multiple purposes beyond exports.

   

✔ Electronic Bank Realisation Certificate (e-BRC):

• Specifically issued for inward remittances related to export transactions.

   

• Required to claim benefits under India’s Foreign Trade Policy.

   

e-BRC Requirement for GST Refunds

📌 When filing a GST refund application for export of services, details of BRC must be submitted.

• In certain cases, exporters are required to submit both e-BRC and FIRC for processing GST refunds.

   

• If an exporter is unable to obtain an FIRC from the bank, they can use the e-BRC to claim input tax refunds by attaching it to the GST refund application.

GST Returns and Penalty

There are no special provisions regarding GST returns for freelancers. Persons with turnover up to Rs. 5 crore can file GST returns on quarterly basis. However, if your turnover is more than Rs 5 crore then it is mandatory to file GST returns on monthly basis.

An annual return is also required to be filed in Form GSTR-9. This return is mandatory for the registered person have a turnover of above Rs 2 crore. Additionally, if the turnover exceeds Rs 5 crore, then a separate reconciliation statement is required to be filed in GSTR-9C.

GST Refund

If you are engaged in export of services then GST law allows you to get the GST refund into your bank account for the following: –

• on the input services/goods used to provide such export of service or
• GST charged and paid to the Government at the time of export of services.

The most important condition or claiming GST refunds are: –

• FIRC to prove export of services.
• The refund application has to be filed within 24 months from the end of the month in which such services are exported.

GST Returns and Penalty

There are no specific provisions for freelancers regarding GST return filing. The filing requirements are based on turnover:

• For turnover up to ₹5 crore – GST returns can be filed on a quarterly basis.

   

• For turnover exceeding ₹5 crore – GST returns must be filed monthly.

   

Additionally, an annual return is required in Form GSTR-9 if the turnover exceeds ₹2 crore. If the turnover exceeds ₹5 crore, a separate reconciliation statement must be filed in GSTR-9C.

For details on due dates and late fees for GST returns, refer to our article on Late Fees for Various GST Returns.

GST Refund

If you are engaged in the export of services, GST law allows you to claim a refund for the following:

1. GST paid on input services/goods used for exporting services.

    

2. GST charged and paid at the time of exporting services.

    

Key Conditions for Claiming GST Refund

• FIRC (Foreign Inward Remittance Certificate) is required to prove the export of services.

   

• The refund application must be filed within 24 months from the end of the month in which the services were exported.