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The GST has brought in a uniform law throughout the country be it for large business houses or the small and mid-size firms. Every person is directly or indirectly affected by it. We should know that even the freelancers would fall under the ambit of GST.
Freelancers are persons who work on multiple engagements and are not employed by anyone. They work under contract basis on specific assignments and receive a contract fee for the same. On reading the definition, it becomes clear that a freelancer is a service provider and rules relating to service provider shall also be applicable to him.
We know that under the GST law, mandatory registration needs to be obtained in the following situations:
Under the GST Act, OIDAR services include the following:
For more information on OIDAR click here
As per the GST Act, there is a special scheme notified in March 2019 that may be opted by a service provider with annual turnover of less than Rs 50 lakh. The compliance, conditions and benefits are similar to the composition scheme under Section 10 of the CGST Act. A nominal GST will be paid on quarterly supplies at 6% (3% of CGST and 3% of SGST). Based on the above, we can conclude that a scheme with nominal tax rate is available for freelancers as well.
The rates of tax under GST are 0%, 5%, 12%, 18% and 28%. The services will be taxed as per the respective slab rates. If nothing is specified, 18% would be the applicable tax rate.
The invoice raised by the freelancer shall be according to the GST laws. The invoice should contain name, address, GSTIN of the supplier as well as the recipient, SAC of services, date, value, and signature. To know more about invoice, click here
The freelancer, like any other taxpayer under the GST is allowed to take the input tax credit of the services used by him for the purpose of rendering service.
For example, he may be using a laptop, electricity, telephone etc to provide taxable service. Further, the tax being charged by the freelancer can also be taken as input by the recipient of service. Therefore, we can conclude that the burden of GST does not fall on the freelancer nor will his fee be reduced as he will be collecting the extra tax amount from the customers.
A total of 25 Returns should be filed which includes 2 monthly returns and 1 annual return. To read more about filing returns, click here If a freelancer does not opt to register and collect GST, it is not that the Government will not be able to track it.
The department will still know about his turnover either if TDS is deducted in his case (by the person making payment to him) or through the payments in his bank accounts. Since all accounts are Aadhar and PAN linked, it is tough to escape from the eyes of Law.
We can now comprehend that a freelancer is bound by the laws of the Act and non-compliance may result in a penalty. To avoid the same, expert advice is recommended for registration, return filing and invoicing.