Understanding GST for Freelancers in India
In India, Goods and Services Tax (GST) is applicable to the services provided by freelancers, as per the GST law. Freelancers are considered as service providers operating in the course or furtherance of business, making their services taxable under GST.
If a freelancer’s annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states), GST registration becomes mandatory. However, if a freelancer is engaged in the export of services, GST registration is required irrespective of turnover.
Once registered, freelancers must charge 18% GST on their taxable services. However, some services attract a lower rate or may be exempt from GST altogether.
Export of Services and GST Compliance
What Qualifies as Export of Services?
Export of services is classified as zero-rated supply under GST, meaning no GST is levied, but exporters can claim Input Tax Credit (ITC) on the GST paid for inputs and input services.
As per Section 2(6) of the IGST Act, for a service to qualify as an export of service, the following conditions must be met:
- Supplier of service is located in India.
- Recipient of service is located outside India.
- Place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange or in INR, as permitted by the RBI.
- Supplier and recipient must not be merely distinct establishments of the same person (as per Section 8 of the IGST Act).
How to Export Services Without Paying GST?
Freelancers and businesses exporting services have two options to avoid paying GST at the time of export:
1. Furnishing a Letter of Undertaking (LUT)
Freelancers and businesses with a good compliance history can submit an LUT to the GST department. This allows them to export services without paying GST upfront while still being eligible to claim Input Tax Credit (ITC).
2. Paying GST and Claiming a Refund
If a freelancer does not furnish an LUT, they must pay GST on the export of services and later claim a refund by filing a refund application in Form GST RFD-01.
👉 Key Note: Every payment received from a foreign client does not qualify as export of services. If any of the conditions under Section 2(6) of the IGST Act are not met, the transaction is treated as a domestic supply and becomes taxable under GST.
GST Return Filing for Export of Services
Freelancers and businesses exporting services must comply with regular GST return filings to remain compliant and claim ITC or refunds. The key GST returns are:
1. GSTR-3B (Monthly/Quarterly Filing)
- Must be filed on a monthly or quarterly basis based on turnover.
- Exported services must be reported in Table 3.1(d) of GSTR-3B.
2. GSTR-1 (Details of Outward Supplies)
- Filed monthly or quarterly based on turnover.
- Exported services must be reported in Table 6A of GSTR-1.
3. Invoice & Document Maintenance
- Export invoices must contain “Supply meant for export under LUT without payment of IGST” or “Export with payment of IGST”.
- Maintain shipping bills, airway bills, and bank realization certificates as proof of export.
4. GST Refund for Exported Services
- If GST is paid, a refund can be claimed via Form GST RFD-01.
- If LUT is filed, no GST is paid, but ITC can still be claimed.
Additional Insights: GST for Freelancers in Special Cases
1. GST on Freelancers Providing Services to Indian Clients
- If a freelancer provides services within India, GST is charged at 18% (unless the service is exempt).
- Reverse charge mechanism (RCM) may apply for specific services.
2. GST on Freelancers Receiving Payments from Foreign Clients
- Every transaction must meet the export criteria to be zero-rated.
- If the criteria are not met, GST must be charged at 18% even for foreign clients.
3. GST Exemptions for Freelancers
Some services like education, healthcare, and specific government-related services may be exempt from GST. Always check the latest GST rate notifications.
FAQs on GST for Freelancers in India
Q1: Is GST registration mandatory for freelancers in India?
👉 Yes, if your turnover exceeds ₹20 lakhs (₹10 lakhs for special category states). However, GST registration is mandatory for exporters irrespective of turnover.
Q2: What is the GST rate on freelance services?
👉 The standard GST rate for freelance services is 18%. Some services may be exempt or attract a lower rate.
Q3: Can freelancers claim Input Tax Credit (ITC)?
👉 Yes, freelancers registered under GST can claim ITC for GST paid on business-related expenses.
Q4: How can freelancers export services without paying GST?
👉 By submitting an LUT to the GST department, freelancers can export services without paying GST.
Q5: Can freelancers claim a GST refund?
👉 Yes, if they have paid GST on exported services, they can claim a refund via Form GST RFD-01.
Q6: What happens if I receive payments from a foreign client but don’t meet export conditions?
👉 If your transaction does not meet the conditions of export under Section 2(6) of IGST Act, then it is treated as a domestic taxable service, and GST at 18% is applicable.
Need GST Assistance? Contact a CA Firm in Delhi, Bangalore, or Noida!
Understanding GST compliance for freelancers and exporters can be complex. If you need expert guidance on GST registration, LUT filing, return filing, or refunds, consult N C Agrawal & Associates, A CA firm in Delhi, CA firm in Bangalore, or CA firm in Noida for personalized assistance.
For professional GST consultancy, tax planning, and compliance support, contact an experienced Chartered Accountant today!
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