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Everything You Should Know About Paying GST As A Freelancer In India

Posted: October 5, 2020

Even if you are a freelancer, the govt of India has mandated paying GST in certain circumstances. Here’s what you should know.

The arrival of the gig economy couldn’t have come at a better time. As people stay put at home, a little more time is saved on the day-to-day shuttle meaning a greater chance to look for freelance jobs in 2020.

It is said that India has the largest freelance workforce after the United States of America, and that indicates that the industry is packed with action and competition.

Paying GST as a freelancer

Now, as a freelancer, you provide certain services, and the government of India has determined that there are circumstances in which a freelancer is required to pay GST. Goods and Services Taxes is a compound tax that has replaced all the other types of taxes for clarity and simplicity. Yes, it is applicable for the services industry too.

Freelancers are liable for IGST, CGST, or CGST, depending on the location of their clients. It’s important to remember that there is no exemption from GST. Even if you work solely with international clients, you still may be liable for paying GST.

So the first question most freelancers ask as beginners is how much GST would a freelancer charge?

Since it is the replacement service tax for a freelancer, the GST charges will be 18% of the total bill amount. Every bill or invoice that you generate will need to have 18% GST discernable on it.

The next thing to understand is – Is GST registration necessary for a freelancer?

Regardless of the nature of your services, GST registration for a freelancer depends on the following factors:

  • Annual revenue < 20 lacs – Registration not required.
  • Annual revenue > 20 lacs, irrespective of clients’ location in India – Registration required
  • Only overseas clients and payment is via a foreign bank account, PayPal, or Western Union? Registration not required, notwithstanding your income threshold.

Who pays for GST charges?

Your clients will pay you and in turn you will pay the same to the government. Subsequently, clients can claim it as tax credit when they file for taxes making it a win-win for every party.

Do not pay for the GST charges yourself, even if your clients ask for a concession, because you will pay it and your clients, nonetheless, will get tax credit for it.

What is the process of filing GST returns?

GST returns need to be filed quarterly or monthly based on the revenue and if you have chosen the composition scheme. Composition sellers or dealers and those with annual sales less than Rs.1.5 crore can file quarterly returns.

Once you acquire a GST Identification number, filing GST returns is mandatory for you.

Importance of agreements/contracts

Many times, a freelancer’s work is considered to be the client’s work, or is attempted to be stolen, thus taking away the freelancer’s right to get credit – both in terms of acknowledgement and payments.

A freelancer must always bear in mind that they must have ensured a copyright over each of their creations. Only you can choose who can use it and whether or not it can be recreated, unless of course you sign an agreement stating otherwise.

Whenever a client asks for work, you start focusing on the deliverables, without taking the effort to enter into an agreement with him. This way, you put yourself at a huge risk of being deceived in terms of non-payment, no extra payment for extra work, etc. Hence, an agreement is imperative and it should include details like both parties’ names, organization names and addresses. It should clearly spell out the frontiers of work, schedule of payments, deadlines, confidentiality, termination, dispute resolution, et al.

Tax regulations

Freelancers must also be aware of TDS.

Persons or establishments you enter into a contract with may deduct tax at a consistent rate on all your bills in accordance with the law. However, you can retrieve some of this money from the government by claiming a tax refund. For this, Income Tax Return (ITR) should be filed under the appropriate ITR Form.

Also, there are several ways in which freelancers can save taxes. Going by Section 80 of the Income Tax Act, a freelancer can save his/her tax outflow by over Rs 1.5 lakh if they invest a particular sum in tax-saving instruments. Premiums for health insurance, investment in central govt. schemes, education loans, property loans, property rent, donations made to charitable trusts, etc. are some such instruments.

First published here.

Image source: Andrea Piacquadio on pexels

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Vanshika Goenka is the CEO & Founder of Kool Kanya, an online career community for

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