Are you engaged in freelancing? Are you wondering about the necessity of GST registration for freelancers? Worry not, for we are here to provide assistance. In this article, we will delve into the key aspects of GST registration, its benefits, and the payment conditions relevant to freelancers.
Who is required to undergo GST registration in India?
GST registration might appear to involve a substantial effort. However, it’s important to note that it is not obligatory for everyone. Let’s shed light on the situations that demand GST registration:
- If your business achieves a turnover exceeding Rs. 20 lakhs within a fiscal year, consider regular category states.
- For individuals residing in special category states, the turnover limit is Rs. 10 lakhs.
- If you receive payments for services categorized under OIDAR (Online Information and Database Access and Retrieval). This encompasses activities like internet advertising, cloud-based services, and intangible items such as e-books, digital entertainment (music, movies, online gaming), software, and other electronic data like video lessons.
Significance of GST for Freelancers and its Benefits
Given that the Goods and Services Tax (GST) functions as an indirect tax on the provision of goods and services in India, Indian freelancers are also liable to pay GST when their turnover surpasses Rs. 20 lakhs during a fiscal year.
As freelancers, you do not experience unique advantages by registering for GST. The benefits linked with GST registration remain uniform for all. In this new GST framework, you have the convenience of filing tax returns online. The process involves creating an account on the GST Portal, logging in, and initiating the filing of your GST returns.
A central benefit of registration lies in your ability to claim GST credit. This credit can be employed to offset future GST obligations, and you can also pursue a GST refund (subject to specific conditions). For instance, if your firm conducts advertising activities on platforms like Google to attract new clients, you are obligated to remit 18% of the total amount as GST.
Essential Documents for GST Registration
For the purpose of GST registration, the following documents are necessary:
- Your photograph
- Copies of your PAN and Aadhaar card
- Proof of identification and residence
- Recent bank account statement or a canceled check
- Your digital signature
- Utility bills such as electricity or telephone bill
- Office lease agreement
- No objection certificate
Post GST Registration Procedures
Upon submitting all required documents and completing the necessary formalities, adherence to the legal process is crucial. While issuing invoices, the GST amount must be included in the total billed amount. For instance, if your invoiced sum for a client is Rs. 25,000, after adding 18% GST, the total payable amount becomes Rs. 29,500.
Upon collecting GST, it’s imperative to remit the collected amount to the government while filing GST returns.
Payment Terms and Conditions for GST-Registered Freelancers
Several terms and conditions concerning payments are pertinent to GST-registered freelancers:
- GST rates for your services can vary from 0%, 5%, 12%, 18%, to 28%, based on the nature of your service. In the absence of a specified rate, a GST rate of 18% should be charged to your clients.
- Following the receipt of your GST identification number, regular GST filing (both monthly and yearly) is mandatory, irrespective of your current annual turnover.
- All payments must be conducted online. This necessitates filing 37 returns annually: three monthly filings and one annual return.
- Delays in depositing GST proceeds might result in fines.
- To ensure timely GST deposit, issuing invoices on the 1st of the subsequent month is advisable. This offers ample time to settle your monthly GST liability.
- After fulfilling all applicable tax obligations, submission of a monthly summary return under GSTR 3B is required.
GST Registration and Invoicing for Freelancers
If you operate as a freelancer, your clients anticipate receiving invoices from you. While submitting an invoice, your client might deduct 10% Tax Deducted at Source (TDS) from each invoice.
If your earnings fall below Rs. 20 lakhs (or Rs. 10 lakhs in special category states), GST registration is not compulsory even if you issue invoices.
Freelancers registered under GST are required to adhere to the latest GST regulations set forth by the government.
Invoices must include your name, address, GSTIN for freelancers, your client’s GSTIN, Service Accounting Codes (SAC), date, amount, and signature.
In Conclusion
Considering that your PAN and Aadhaar are linked to all your financial transactions, opting for GST registration is a prudent choice. While GST filing may seem daunting for many freelancers, engaging a chartered accountant (CA) with experience in freelancing and sole proprietorship will ensure compliance with the most current laws in effect.