Get To Know about GST Registration for Freelancers

By Online Legal India Published On 02 Mar 2023 Updated On 03 Jan 2024 Category GST

The Goods and Services Tax (GST), whether it be an enterprise or a small or mid-sized business, has impacted every area of the Indian economy. Yes, even independent contractors are caught in their net, but they may or may not be required to pay GST.

Even though you are exempt from GST as a freelancer, it is still vital to understand how GST functions since, whenever your firm expands, you will need to register it under GST.

Definition of a Freelancer under GST

An individual who does services under the contract is known as a freelancer. The same employment regulations do not cover them because they are not employees of an organization. Freelancers are subject to the same GST regulations that apply to service providers.

What is the GST Registration limit for a freelancer?

The following circumstances necessitate a freelancer's mandatory registration under GST as a service provider:

When annual revenue is greater than Rs 20 lakh (For states other than the North-Eastern States)
When annual revenue crosses 10 lakh rupees (For North-Eastern states)
Regarding services covered by OIDAR services (*online information and database access and retrieval services),
If the value of the export service exceeds Rs 20 lakh.

According to the GST Act, OIDAR services include the following services:

Cloud-based services delivery
Using the Internet to advertise
games offered online
There is a provision for online selling software, movies, music, and other intangibles.
she is transferring data or information to anyone in electronic form across a computer network, whether for retrieval or another purpose.

Can a freelancer register as a composite dealer?

Any service provider is not permitted to choose the composition scheme under the GST Act's provisions. An exception to this rule is a service provider that offers restaurant services.

Therefore, a freelancer is not permitted to choose the composition scheme.

You can read about the GST Composition Scheme to learn more about the benefits and drawbacks of the composition scheme.

Documents required for GST registration

You're picture
A copy of your Aadhaar card and PAN
Proof of identity and address
Most recent bank statement or a canceled check
Your electronic signature
Telephone bill or electricity bill
The agreement for renting office space
Certificate of No Objection

Which GST rates apply to freelancers?

Following the type of service rendered, the GST rates that apply to independent contractors are 0%, 5%, 12%, 18%, and 28%. You must charge your customers 18% GST if there is no set price for the service being supplied.

Check out our free GST calculator if you're curious about how to add profit margins to your freelance services and get accurate GST-inclusive & exclusive rates.

Invoicing rules for freelancers

A freelancer should always use GST-compliant invoices. The invoice should have all the relevant details, including the recipient's and the service provider's GSTINs, the SAC for the services, the date, the cost of the services, and so forth. You can use Razorpay Invoices to make GST-compliant invoices by consulting our GST invoice tutorial.

Is a freelancer eligible to claim an input tax credit?

With an input tax credit (ITC), you can deduct the tax you already paid on purchases from the GST that will be due as a result of your sales. All regular taxpayers who are enrolled for GST registration are permitted to use ITCs to lower their GST obligations.

The same taxes paid on services utilized by a registered freelancer to provide any service may also be used by them.

As an illustration, a freelance photographer charges Rs. 2,50,000 for a wedding session and hires a printing company for Rs. The following is the net GST due in this scenario:

Particulars	Amount
Photography Services Provided	250000/-
Additional GST on Output Services(18%)	45000/-
Total Amount Charged	295000/-
Staffing Charges Paid	50000/-
Additional GST paid on Service Received (18%)	9000/-
Total Payment Made	59000/-

Net Amount of GST payable by the photographer	Amount
GST to be paid on Output services	45000/-
GST already paid on service received(Input Tax)	9000/-
Net GST payable	36000/-

How many GST returns does a freelancer have to file?

If a freelancer is registered as a regular taxable person, he must file 25 GST returns annually.

What is the penalty for late filing of returns?

There will be a 200 rupee late fee.
Additionally, 18% annual interest will be charged. The taxpayer will compute this based on the amount of tax due.
If the tax is not paid, a minimum penalty of Rs 10,000 will be assessed.
The highest penalty for delinquent taxes is 10% of the total amount owed.

What are some common mistakes freelancers make when submitting GST statements?

While submitting their GST returns, freelancers frequently make the following blunders, among others:

They frequently neglect to maintain precise records of their income and expenses, which makes it challenging to complete their returns correctly.
If the independent contractor asserts expenses that aren't genuinely eligible for the GST deduction, they could face fines or have their claims rejected.
They might overlook the deadline for filing their forms, which could incur late fines or interest costs.

How can freelancers claim GST refunds?

Freelancers can apply for a GST refund by

GST RFD - 01 filings
Obtaining tax authority clearance using the GST RFD - 02 Form.

Conclusion:

To fully grasp GST, freelancers need to engage a GST Practitioner, CA, or GST expert. This will enable independent contractors to benefit from GST and advance their businesses.