This blog is meant for service providers, not for goods sellers. If you are a self-employed individual, freelancer, or consultant, this blog is relevant to you.
This blog includes GST requirements for freelancers, GST compliance for freelancers after taking GST registration, and, the method to claim zero taxes on the export of services, This blog includes all these points in a simplified way.
When to take GST? As soon as your total receipts touch 20 lacs, you must take GST registration. 10 lacs is the limit for specified states which includes. Jammu and Kashmir, Assam, Arunachal Pradesh, Sikkim, Meghalaya, Nagaland, Tripura, Mizoram, and Manipur.
If you are into export of services the above threshold limit is not applicable. You must apply for gst registration for any value of service export.
What is the tax payment like after taking GST registration?
For supplies made in India: Under GST tax payment 18% is the tax rate. For the supply of services made in India, one can opt for the composition scheme and pay a total of 6% instead of 18% but then no Input tax credit can be availed in that case.
The composition scheme is for those having turnover of fewer than 50 lacs and providing services in only the same state where the business is registered.
For supplies made outside India: Supplies made outside India also termed as export of services are a zero-rated service under GST law.
To call it export of services, the client must be located outside India, they must not have any establishment in India and the amount you received must be in convertible foreign currency, payment is generally received by a bank in foreign currency and it comes as rupees in your account-this is also considered to be received in convertible foreign currency.
Make sure you have Foreign Inward Remittance Certificate (FIRC) for the transaction. Banks or payment gateways help you get the FIRC.
Being zero-rated, no taxes are to be paid. But you have to apply for a Letter of Undertaking (LUT) for the same. The objective of having LUT is to declare that you are an exporter of service therefore you are not paying any GST on your export services.
Availing of refund for Input Tax Credit on the export of services
Under the export of services, you don’t have to pay taxes under GST, if you have paid any GST in India which is directly related to your services export business-you can take a refund of such GST taxes paid if all conditions are fulfilled. If you are applying for a refund of GST, FIRC is a compulsory document. You can get FIRC from banks or payment gateways.
What are the GST filing compliances for Freelancers after taking GST registration?
For services provided in India: You must pay GST tax on all your supplies. File GSTR-1 and GSTR-3B monthly or quarterly. GSTR-1 is to report your every supply of services and GSTR 3B is to report if taxes are applicable and taxes are to be paid if you are making the supply of services in India.
For services provided outside India: Though you have to pay zero taxes on the export of services you still have to file GST returns every month or quarter. File GSTR-1 and GSTR-3B monthly or quarterly. GSTR-1 is to report each supply of services and GSTR 3B is to report if taxes are paid if applicable otherwise show it as zero-rated.
GST Annual Filing and GST Annual Audit on crossing a certain threshold
If your total turnover is above 2 Crores, You must file GSTR-9 which is also called GST Annual return. And if your turnover is above 5 crores you must get a GST audit certificate along with a proper audit from a Chartered accountant. You can avail ca services online or find a ca near me for the same. Make sure your service provider has the experience and expertise to guide and file the required return
Tax Vic has the best solution for freelancers in India. CA REETU, a tax consultant for freelancers is already helping several freelancers across India on matters such as tax planning & savings for freelancers, tax filing for freelancers, and Personal finance guidance for freelancers in India. You can drop us an email at firstname.lastname@example.org and we will get back to you as fast as we can.