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GST for Freelancers: Registration, Exemption Limit, Rules, GST Rate

By Annapoorna

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Updated on: Nov 30th, 2023

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5 min read

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.

Whether a ‘Freelancer’ is liable to be registered?

We know that under the GST law, mandatory registration needs to be obtained in the following situations:

  • When the turnover crosses the threshold limit of Rs. 20 lacs (general cases)
  • When the turnover crosses the threshold limit of Rs. 10 lacs (specific cases of North-east states)
  • For services covered under Online Information and Database Access and Retrieval services (‘OIDAR’)
  • In case of export of services, since a mandatory GST registration is required for any inter-state supply of goods/services. Export of services is termed as “zero-rated supplies” and qualifies as “inter-state supply” under the IGST Act.

What are OIDAR services?

Under the GST Act, OIDAR services include the following:

  • Advertising on internet
  • Providing cloud service
  • Provision of e-books, music, movie, software and other intangibles via the internet
  • Providing data or information, retrieval or otherwise to any person in electronic form through a computer network
  • Online gaming

For more information on OIDAR click here

Whether composition scheme is applicable to a freelancer?

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.

What would be the rate of tax applicable?

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.

What are the rules regarding invoicing?

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.

Is the service provider eligible for input?

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.

Should returns be filed?

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.

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About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

GST has implications for freelancers. They must register if turnover exceeds thresholds. OIDAR services are included under GST. Composition scheme applies if turnover is less than Rs 50 lakh. Invoicing must follow GST laws. Input tax credit eligible. Total 25 returns must be filed. Compliance is crucial to avoid penalties.

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