The Goods and Services Tax (GST) is a single unified tax in India, and freelancers are not exempt from its applicability. As a freelancer, if your turnover exceeds the specified limits, then you are bound to register for GST regardless of your type of service – whether it’s web design or consulting, content writing or any other freelancing professional services. Understanding GST for freelancers involves recognizing the turnover limits for registration, complying with regular filing requirements, and calculating the correct tax on services rendered. GST registration enhances credibility, helps avoid penalties, and allows freelancers to benefit from the Input Tax Credit (ITC), which will help you strengthen financial management.

Introduction to GST for Freelancers

The GST or Goods and Services Tax is a uniform tax across India, integrating multiple formerly separate indirect taxes. It was implemented in 2017. GST covers the sale of goods and services, making it relevant to a broad range of professionals, including freelancers. For freelancers who offer professional services – consulting, digital marketing, web design, content creation – the threshold to compulsorily get GST registration is ₹20 lakh (₹10 lakh from special category states) of turnover in a financial year.

GST aims to streamline tax collection. It ensures businesses and professionals contribute their share of taxes transparently. While freelancers might not take the form of a business establishment, they are treated no differently than one when it comes to setting up and paying their GST. After registering for GST, freelancers must attach GST to the services they offer and submit tax returns regularly, otherwise, they’re liable for fines.

Also Read: GST Registration Requirements

Who Needs to Register for GST?

GST registration for freelancers is mandatory under certain conditions, primarily based on their annual turnover. Here’s a detailed look at who needs to register for GST:

Turnover Threshold for GST Registration

Freelancers must register for GST if their annual turnover exceeds ₹20 lakh. (For freelancers based in special category states, including Himachal Pradesh and Uttarakhand, the threshold is ₹10 lakh.)

This includes turnover from all services offered – whether the client is in the same state, out of state or overseas.

Mandatory Registration for Interstate Supply

If a freelancer’s turnover is below the threshold, GST registration becomes mandatory if they provide interstate services. For instance, if a freelancer in Delhi provides services to a client in Mumbai, GST registration is required irrespective of their annual earnings.

Interstate supply includes any services provided outside the freelancer’s home state.

Export of Services

Freelancers, who provide their services to clients outside India, serve as ‘exporters’. Exports are zero-rated under GST. However, to be eligible for the benefits of ITC (Input Tax Credit) any claim for refund on the GST paid on business-related purchases, freelancers need to register for GST.

Registering for GST allows freelancers to avail of benefits under the Export of Services category.

Voluntary Registration

Freelancers whose turnover is below the threshold but want to take advantage of ITC can opt for voluntary registration. This can help freelancers with significant business-related expenses, allowing them to claim tax credits on GST paid for goods and services used in their operations.

Voluntary registration is also advantageous from a brand reputation standpoint for freelancers who have clients who require invoices to be GST-compliant. 

Compulsory Registration in Special Cases

Freelancers using online platforms for their services may be required to register for GST regardless of their turnover. Upwork, Freelancer and Fiverr, for example, can set their own rules requiring freelancers to be GST-compliant if they wish to work with them.

To summarize, GST for freelancers depends on their income, the nature of their services, and their geographic reach. Freelancers, however small in turnover, are obligated to register for GST if they are engaged in interstate or international commerce.

Also Read: GST State Code List

GST for Professional Services

Professional services offered by freelancers are subject to GST. These are services such as web development, graphic design, digital marketing, consulting, content creation, and so on. For freelancers, it is important to understand how GST for professional services applies to them, as it directly impacts their invoicing, tax filings, and overall business operations.

Definition of Professional Services under GST

Professional services refer to any service provided by an individual, business, or freelancer for a fee. This includes creative, advisory, technical, and consultancy services.

Legal advice, content writing, IT services, marketing consultancy and financial advisory are some examples of professional services.

GST Rate for Professional Services

The typical GST rate for most professional services is 18%. For example, if a freelancer charges ₹50,000 for a project, they would need to add ₹9,000 as GST and send an invoice of ₹59,000 in total to their client.

Education and healthcare services might have a lower GST rate, or might even be exempted from GST. Freelancers offering these services should check where they fall on the GST scale.

Invoicing with GST

Freelancers need to also issue GST-compliant invoices when charging clients for professional services.

For example, a GST-compliant invoice must include details like:

• • Name and address of the freelancer
  • GSTIN of the freelancer
  • Invoice number and date
  • Description of services provided
  • GST rate and amount charged
  • Total amount payable by the client (inclusive of GST)

Reverse Charge Mechanism (RCM)

GST for professional services can be treated under RCM in some cases, meaning that the onus is on the client to pay GST, rather than on the freelancer – although this might be the case in instances where a non-registered freelancer works for a registered business. In reality, this will not apply to most freelancers providing regular services to registered clients.

GST Compliance for Professional Services

Freelancers offering professional services must ensure compliance with GST rules by maintaining relevant documents, issuing compliant invoices and filing GST returns as per deadlines.

A proper record maintenance can help freelancers file their taxes easily and minimize their liability under GST.

Understanding the GST for professional services is essential, as it affects how freelancers price their services, invoice clients, and fulfil tax requirements. By meeting these guidelines, freelancers can provide an efficient and well-organized service to the client and also comply with tax obligations.

Also Read: Types of GST

What is the GST Registration Process for Freelancers?

The GST registration process is crucial for freelancers to ensure compliance with the tax regulations. It helps freelancers in India to charge GST for the services they offer and claim ITC for their business expenses.

Looking for guidance on how to apply for GST as a freelancer? Here is the process.

Step 1: Check Eligibility

First of all, check if you are eligible for GST registration. You need to start registering if you are a freelancer with an annual turnover of above ₹20 lakh (₹10 lakh for special category states) or you provide an interstate supply of services or work for foreign clients, irrespective of your turnover.

Step 2: Prepare Necessary Documents

To register for GST, freelancers must have the following documents handy:

• PAN card
• Aadhaar card or other identity proof (passport, voter ID)
• Bank account details (canceled cheque or account statement)
• Address proof (electricity/gas bills or rent agreement)
• Photographs of the applicant
• Address proof for business (if you operate out of a separate office)

Step 3: Visit the GST Website

You must visit the official website for GST, to begin with the registration process.

Step 4: Fill Out Part A of GST REG-01

On the GST website, under the ‘Services’ tab, click on the option ‘New Registration’ and fill in your PAN, mobile number and email ID in Part A of Form GST REG-01. An OTP would be sent to your mobile number and email ID provided for verification. Post entering the OTP you will be provided with your Temporary Reference Number (TRN) for the next registration step.

Step 5: Fill Out Part B of GST REG-01

Login to the GST website using the TRN you were assigned. Fill out the Part B of Form GST REG-01. Provide information about your business, such as the name, address, nature of business (freelancing), and bank account details and upload all the necessary documents mentioned in Step 2.

Step 6: Verification of Documents

Following your application submission, your documents will be checked and, when approved, you will receive an Application Reference Number (ARN). This number will later allow you to check your application’s status. 

Step 7: GSTIN Issuance

If verified successfully, you will be allocated a GSTIN. The GSTIN is a 15-digit number that will be your unique identity for all your GST transactions. You will also receive a certificate of registration under GST, which serves as the registration document. 

Step 8: Maintaining Compliance After Registration

Once you’re registered, you must charge GST on your services and send GST-compliant invoices to clients. You must also file regular returns, even if there were no transactions in a particular period.

Registering for GST as a freelancer can help you comply with tax requirements. It could help you streamline business operations and improve your brand credibility. 

How to Calculate GST for Freelancers?

Once registered, freelancers are required to include GST on their invoices and clearly mention the amount for clients to know. Here’s how you can calculate GST for freelancers:

GST Rate for Freelancers

Usually, a standard rate of GST is 18% for professional services. Most freelancing jobs are subject to GST at this rate. For example, services such as web designing, content creation, software or application development and other similar services. 

Some services, such as education and healthcare-related, may be subject to a lower rate or be exempt from GST.

How to Calculate GST

To calculate GST on your invoice, use the below formula:

GST Amount = (Service Value x GST Rate) / 100

For instance, say the price for a service is ₹60,000, and the rate of GST in relation to that service is 18%, the calculation of GST will be as follows:

GST Amount = (60,000 x 18) / 100 = ₹10,800

Hence, the GST inclusive amount would be:

₹60,000 (service fee) + ₹10,800 (GST) = ₹70,800 (total invoice)

GST Invoices

After calculating the GST amount, freelancers must issue GST-compliant invoices to their clients.

The invoice must show the value of the service and the tax amount, so that the client knows how much tax they are paying.

GST on Advance Payments

Freelancers also get advance payments against work. This is subject to GST as well. A receipt voucher has to be issued for the advance amount with applicable GST and this has to be filed against the GST returns.

For example, if you get an advance of ₹30,000, you can calculate the GST on the advance as below:

• • GST Amount = (30,000 x 18) / 100 = ₹5,400
  • The receipt you send to the client should reflect this amount.

GST on Exempted Services

Some services provided by freelancers may be exempt from GST or subject to a reduced GST rate. For example, services provided to clients outside India are generally considered to be zero-rated under GST (meaning they are at a tax rate of 0%)

In such cases, freelancers need not charge GST, but might still have to fill out GST returns and claim refunds when applicable. When your freelancing service is either exempt or zero-rated, you have to mention the same on the invoice.

Reverse Charge Mechanism

In some cases, RCM applies. This is less common for freelancers providing standard services but may apply in certain transactions where the client is an unregistered entity or in specific services categories.

GST Calculation with Online Tools

Freelancers can easily calculate GST using the many online GST calculators that are made available by third party websites. The calculators are useful as they allow freelancers to key in the value of their services and have the GST calculated on-the-fly, thereby eliminating errors in their billings.

Rounding Off GST Amounts

When calculating GST for invoices, freelancers should round off the GST amount to the nearest rupee. For example, if the calculated GST amount is ₹7,224.67,  you can round it off to ₹7,225 and make the billing process simpler. 

By following these steps, a freelancer has done their due diligence to ensure they are charging and invoicing GST correctly on the services they sell.

GST Filing and Compliance for Freelancers

Freelancers enrolled under GST must regularly file GST returns to comply with the law and avoid hefty penalties. Here’s what freelancers need to know:

Types of GST Returns to File

GSTR-1: It’s filed either monthly or quarterly depending on turnover. It shows details of the outward supply of services. For example, writing or consulting services.

GSTR-3B: This is a summary return filed monthly. It shows the total services provided, GST collected, and ITC claimed.

GSTR-9: It is filed annually. It summarizes all GST activities over the financial year.

Filing Frequency

Monthly: For freelancers with turnover above ₹5 crore.

Quarterly: For turnover below ₹5 crore, under the QRMP scheme.

How to File GST

Freelancers must file returns online via the GST website by logging in using their GSTIN. Compliant reporting of returns is very important for freelancers and they are expected to make payments for any outstanding liabilities when they file returns. 

Late Fees and Penalties

Penalties for late filing are ₹50/day for GSTR-1 and GSTR-3B. Nil returns will attract penalties of ₹20/day.

Claiming Input Tax Credit (ITC)

Under ITC, GST paid on a business expense can be subtracted from tax payable. Ensure to match supplier invoices with GSTR-2A for a valid claim.

Common GST Filing Mistakes

You shouldn’t have any differences between GSTR-1 and GSTR-3B to ensure your ITC claim is legitimate. Do file nil returns even if no business was conducted.

Professional Assistance

Freelancers can use GST filing tools or hire tax professionals to ensure accuracy and timely submissions.

Staying up to date with filing and compliance ensures freelancers avoid penalties and maintain good financial standing.

Benefits of GST Compliance for Freelancers

Apart from avoiding penalties, being GST-compliant enables one to build up a reputation in the market, get tax incentives, and broaden business opportunities. Here are the key benefits of GST compliance for freelancers:

1. Enhanced Credibility: GST-registered freelancers appear professional and trustworthy to clients.
2. Access to ITC: Freelancers can claim ITC on business-related expenses, reducing their overall tax liability and boosting profitability.
3. Avoidance of Penalties: Compliance prevents late fees, interest on unpaid taxes, and legal action. 
4. Business Growth: GST registration lets the freelancers work with clients all over India as well as on foreign soil. This can help them broaden their market reach and grow their business.

Common GST Mistakes Freelancers Make

Despite the best intentions, freelancers can often make mistakes when dealing with GST compliance. Following are a few GST mistakes to avoid:

1. Late Registration: Failing to register for GST on time results in the imposition of penalty once turnover surpasses ₹20 lakh (₹10 lakh in special states). 
2. Not Filing Nil Returns: Filing returns even if there are no services provided is vital for freelancers if they don’t want to face fines.
3. Incorrect ITC Claims: Claiming ITC on personal expenses or not matching supplier invoices can result in ITC denial.
4. Inconsistent Filing: Mismatches between GSTR-1 (invoices) and GSTR-3B (summary returns) can lead to audits. Ensure consistency in returns.
5. GST on Advances: Failing to charge GST on advance payments can lead to underreporting.

How Does EnKash Help Freelancers with GST Filing and Payments?

Getting your head around GST payments can be difficult, but EnKash’s simplified finance platform offers a seamless solution to your problems. You can instantly calculate GST using the free Indian online GST calculator. You can pay, monitor and manage GST bills all on a single platform.

Here’s how EnKash makes  GST payments easy and convenient:

1. Simplified GST Payment: Login to your EnKash account, generate and upload GST challan and complete payment using your preferred online method. The website has a user-friendly design, helping you manage GST payments with just a few clicks.
2. Timely Payments: You can set reminders for tax payments. It can help you meet GST deadlines and ensure that you stay compliant
3. Payment Methods: EnKash streamlines the GST payment experience, avoiding the need to jump onto different sites.. You have access to flexible payment methods when paying bills.
4. Comprehensive Dashboard: With EnKash’s integrated dashboard, you can keep track of your GST payments, along with other business receivables and payables.

Conclusion

To ensure legitimacy and success, all freelancers in India should be well-acquainted with GST and understand its technicalities. In the case of freelancers with an annual turnover of more than ₹20 lakh (or ₹10 lakh in special category states) and those providing inter-state services must compulsorily register for GST. Staying GST-compliant offers benefits such as access to ITC, and enhanced credibility. By carefully managing their GST obligations—such as proper invoicing, timely filing of returns, and accurate calculation of tax liabilities—freelancers can streamline their operations and focus on growing their businesses.

Similarly, freelancers with foreign clients must know the importance of zero-rated exports, which allow them to claim refunds on GST paid on inputs. It can help them minimize their overall tax burden. Adhering to GST rules ensures freelancers are at par with Indian tax laws. It also creates scope for larger business opportunities, since clients often prefer to work with compliant and credible freelancers.

FAQs

Do freelancers have to pay GST on foreign clients?

Freelancers providing services to foreign clients are classified as exporters of services, and these exports are generally zero-rated under GST. No GST is charged on the invoice, but freelancers still need to file GST returns. Additionally, freelancers can claim a refund on the ITC for expenses incurred in providing these services, reducing their tax burden.

What happens if a freelancer doesn’t register for GST when required?

If a freelancer fails to register for GST once their turnover exceeds the ₹20 lakh (or ₹10 lakh in special states) threshold, they face penalties. These can include a late registration fee, interest on any unpaid GST, and other legal consequences. Additionally, they lose the ability to claim ITC, which could increase their tax liability and impact their earnings.

Is GST applicable to freelancers working on online platforms like Upwork or Fiverr?

Yes, freelancers working through platforms like Upwork or Fiverr need to register for GST if their earnings exceed the GST threshold. Even for services provided to foreign clients, freelancers may need to register to claim ITC or to comply with the platform’s tax requirements, though services exported to foreign clients are typically zero-rated.

Can freelancers voluntarily register for GST even if their income is below the threshold?

Yes, freelancers can opt for voluntary GST registration even if their income is below the mentioned limit. This allows freelancers to issue GST-compliant invoices and claim ITC on their business expenses. However, once registered, freelancers must comply with all GST filing and payment obligations, even if their income remains below the threshold.

How is GST calculated on services provided by freelancers?

For most services offered by freelancers, GST is calculated at 18% of the service value. For example, if a freelancer charges ₹50,000 for a service, the GST would be ₹9,000, making the total invoice value ₹59,000. Freelancers should include this GST in their invoices and file the appropriate returns to report their tax liability.

Can freelancers claim ITC on all business expenses?

Freelancers can claim ITC on many business-related expenses such as office supplies, software subscriptions, and internet bills. However, ITC cannot be claimed on personal expenses or goods and services not used directly for the business. To claim ITC, freelancers must ensure that their suppliers have filed their GST returns properly, as this impacts their ability to claim the credit.

Do freelancers need to file GST returns even if they have no business in a particular month?

Yes, freelancers must file nil GST returns even if they haven’t generated any income or provided services in a given month or quarter. Failing to file returns, even when no transactions occurred, can lead to penalties. Filing a nil return ensures that freelancers remain compliant with GST regulations and avoid late fees.

Is GST applicable on advance payments received by freelancers?

Yes, GST is applicable on advance payments received for services. Freelancers must calculate and report GST on any advances they receive, even if the service hasn’t been fully provided yet. A receipt voucher should be issued to the client, showing the advance amount and applicable GST. This ensures accurate reporting of GST liabilities.

Do freelancers need to charge different GST rates for different services?

While the standard GST rate for professional services is 18%, some services like healthcare and education may be taxed at a lower rate or may even be exempt. Freelancers offering a variety of services need to determine the correct GST rate for each type of service they provide, ensuring compliance and correct invoicing based on applicable tax laws.

How can a freelancer claim a refund on GST paid for exported services?

Freelancers providing services to international clients can claim a refund of GST paid on inputs (such as software or tools used for business). To do so, they must register as an exporter of services and file for a refund through the GST portal. Exports are zero-rated under GST, so freelancers do not charge GST to foreign clients but can still benefit from ITC on their expenses.