IMPACT OF GST ON FREELANCERS

 

WHO IS A 'FREELANCER’?

Freelancing in India remains a nascent industry and therefore the rules and regulations for this chaotic industry are still up within the air. But with GST, it'll become much easier for freelancers to file their taxes as they will easily roll in the hay online. they're taxed as service providers, and therefore the new tax structure has caused coherence and accountability during this sector.

Freelancers are self-employed and sometimes mentioned as independent contractors. A freelancer may be a one that works on his own, independently, providing professional services of some kind without establishing exclusive contractual ties with a client or enterprise. In short, a freelancer may be a quite a service provider without an employer-employee relationship and therefore the GST rules concerning service providers shall also apply to freelancers.

Freelancers generally work home-based, at an owned-office or a co-working space. Most of the days all a freelancer needs are a computer with adequate software and a superb connection to the web.

Usually, firstly the freelancer involves an agreement with the client about the project’s terms, costs, and deadline, and on some occasions, he gets an advance payment before he starts working. Freelancers get new clients mainly through recommendation and self-promotion.

 

IMPACT ON FREELANCERS

 

IS A FREELANCER LIABLE TO GET REGISTERED UNDER GST?

Freelancers are responsible for IGST, CGST, or CGST, counting on where their clients are located. It’s important to recollect that being a long-term freelancer doesn’t cause you to an employee or exempt from GST. albeit you're employed exclusively with clients outside of India, you continue to could also be responsible to pay GST.

Freelancers selling services with a turnover above Rs. 20 lakhs yearly must register for GST. Those with a turnover of but Rs. 20 lakhs and who provide services only within their state are exempt from GST. The law may be a bit different for freelancers within the north-eastern states of Uttarakhand, Jammu and Kashmir, and Himachal Pradesh. There, you would like a turnover of but Rs. 10 lakhs yearly and must provide services only within your state to qualify for a GST exemption.

Regardless of your turnover, if you provide freelance services across state boundaries, the govt requires you to register for GST. for instance, if you’re a field researcher based in Maharashtra and you provide services to a client in Tamil Nadu, you've got to register for GST, albeit you’re just starting out and your yearly turnover is fairly low.

There’s also no GST exemption for freelancers who run their businesses entirely online. So, for instance, if you’re a contract social media strategist, writer, software programmer, or blogger, you’re required to register for GST.

 

GST REGISTRATION FOR FREELANCERS

Here are the cases where the taxpayer must be registered under GST:

• In case when the mixture turnover of the taxpayer exceeds 20 Lacs INR and for North-Eastern states, this limit is 10 Lacs INR.

• Any one that provides OIDAR services.

• Any one that is completing any inter-state supply

• CTP (Casual Taxable Person)

• NRTP (Non-Resident taxable person)

• Any one that is supplying goods on behalf of the principal, in other words, an agent

• ISD (Input service distributor)

• E-Commerce aggregator or operator

 

OIDAR' SERVICES

OIDAR are the services which are defined in CGST act as a web information and database access or retrieval services. In other words, these are the services we enjoy on the web only. These services are only comprised of online work

These services will include –

• Advertising on the web

• Providing cloud services

• Provision of e-books, music, film, programming and different intangibles through the online

• Providing information or data, recovery or in any case to a person in electronic structure through networking

• Online gaming

 

IS COMPOSITION SCHEME UNDER GST APPLICABLE TO FREELANCERS?

Any business in India can voluntarily choose composition scheme if they need turnover less than 75 or 50 lakhs rupees. Composition scheme extends some important benefits to small scale business like fewer compliances etc.

Unfortunately, with the exception of the restaurant industry, freelance service providers across the board don’t qualify to use the composition scheme for taxation. the turnover limit for the companies availing the composition scheme benefits has been raised to INR 1.5 crore. this is often a net positive for the freelance industry, because it will attract more businesses to figure with freelancers who don’t need to add GST to their final invoice. GST for freelancers may be a value increase the industry.

So, this suggests that a freelancer cannot choose the composition scheme.

 

APPLICABLE TAX RATE FOR FREELANCERS

For each industry, there are specified tax codes for your business. it's also provided a hard and fast rate for every service. When the slab isn't fixed during a field or the sector isn't mentioned then that service will come under the overall slab of 18%. Hence the rate of freelance services is eighteen.

There are 0%, 5%, 12%, 18% and 28% tax rates for the GST program. you'll work with online bookkeeping software that auto-calculate the speed for you, counting on preliminary information provided.

 

RULES RELATED TO INVOICING

As per GST law, a tax invoice is required to be issued for each supply of products and services. Further, it's mandatory to issue invoice properly otherwise the penalty of 25000 could also be levied upon the author for supplying the services.

The invoice raised by the freelancer shall be consistent with the GST laws. The invoice should contain a reputation, address, GSTIN of the supplier also because the recipient, SAC of services, date, value, and signature. The invoice raised by the freelancer shall be as per the GST Act. The invoice needs to contain name, address, GSTIN of the service provider and therefore the service recipient.

As per GST law, a tax invoice is required to be issued for each supply of products and services. Further, it's mandatory to issue invoice properly otherwise the penalty of 25000 could also be levied upon the author for supplying the services.

The tax invoice should contain the subsequent details:

• Name, address, and GSTN of the supplier

• Invoice number

• Date of invoice

• Name, address and GSTN (if registered) of the recipient

• If the recipient is unregistered and therefore the value of supply is quite Rs 50,000 then the name and address of the person has got to be mentioned

• HSN or Sac code of the products or services

• Value of products or services provided

• Rate of tax on each item

• Whether the tax is payable on reverse charge

• Signature of the supplier or his representative

 

ARE RETURNS TO BE FILED?

A freelancer must furnish a complete of 37 GST Returns that include 36 quarterly GST Returns including an annual return.

The government will ready to track the freelancer who intentionally doesn't obtain GST registration and collect GST. the govt will realize evasion through his bank transactions as bank accounts are linked with AADHAAR and PAN. Moreover, the govt also can know the turnover of the freelancer just in case if the TDS is deducted through his account or recipient checking account. So, it's quite impossible to flee from the eyes of law after evading tax.

Freelances should also incorporate payment terms of 20-30 days to make sure that the payment is received on time whenever. this may also help streamline the method of payment and make sure that freelancer is compliant with all policies.

Freelancers must submit a monthly summary return under GSTR 3B after paying all taxes applicable. you'll also choose quarterly filing, but monthly is preferable because it becomes a gentle routine. there's a complete of 37 returns needed to be filed under GST for freelancers.

 

Bottom Line

Freelancing in India remains a nascent industry and therefore the rules and regulations for this chaotic industry are still up within the air. But with GST, it'll become much easier for freelancers to file their taxes as they will easily roll in the hay online. they're going to be taxed as service providers, and therefore the new tax structure will cause coherence and accountability during this sector. It’s important to notice that if you’re earning upwards of 40 lakhs during a fiscal year, then you'll need to follow the required guidelines for GST. Being a freelancer are often difficult as you're employed alone on your own. It is often easy if you're not hooked in to anyone. Hence getting the maximum amount knowledge about GST will assist you call at the end of the day. Moreover, non-compliance may attract penalties and consequences as could also be prescribed by the GST law.