I have received queries from our colleagues regarding the GST Impact on Services provided by the Freelancer. What is Freelancer, What types of services will be provided by him , Requirement of Registration, Issue of Tax Invoice, What are the requirements if Freelancer is having export of Services and what are the returns to be filed by Freelancer.
1. What is the meaning of “Freelancer” ?
Freelancer is a kind of service provider; he will be providing services in various areas to the service recipients without relation of employer and employee. Freelancer provides services on short term, long term and assignment basis. Now a days Freelancer play key role in the modern business community. Freelancer are providing services in the fields of preparing Accounting data, Book keeping, Software development, Technical Services, Customer care and call centre, Data Entry , Designing services, Marketing services and Management Consultancy Services etc., Freelancer charged service charges to the extent of his services as per terms and conditions of contractual obligation with service recipient.
2. Is GST registration required to a Freelancer ?
Yes, As per sec2(17(5)(g) of CGST Act,2017, Business includes:- “Services supplied by a person as the holder of an office which has been accepted by him in the course of his trade or PROFESSION or vocation. So, rules of CGST Rules,2017 relating to service provider shall also be applicable to Freelancer.
As per Sec.24 of the CGST Act,2017, certain categories of supplies , who shall be liable to take registration even if their aggregate turnover is below the said threshold limit of Rs.20 Lakhs.(Other than North-East States), In North –East States threshold limit if Rs.10 Lakhs.
In terms of Sub-Section (3) of Section 25 of CGST Act,2017, though not liable to be registered under Sec.22 of CGST Act,2017, may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person.
3. If a person get the GST registration as “Freelancer”, does he follow the compliances of GST Law ?
Yes. He has to follow all the Compliances of GST Law, 2017, He has to maintain books of accounts in Electronic mode or manual, issue of Tax Invoice with all the details of recipient as per Invoice Rules , like Name, address, GSTIN number of the service recipient as well as service provider and Relevant SAC Code , date of supply, Place of supply and value of supply to B2B and Invoice to B2C for his supplies ,filling of monthly or quarterly returns and discharge of GST tax as per his books accounts and Form GSTR-1 and Form GSTR 3B returns on or before prescribed due date of GST Act.
4. What is the GST Rate on services provided by the Freelancer ?
The applicable rate of GST is @9% under CGST and @9% under SGST on Intra-State supply of services or @18% on Inter-State transaction under IGST.
5. Is Composition Scheme available to registered Freelancer ?
Yes, GST Council has recommended in its 32’nd meeting to give relaxation to pay GST tax on Composition Scheme by service providers vide Notification No. 02/2019-Central Tax (Rate) dated 07.03.2019 ,w.e.f.01.04.2019 subject to condition that any service provider is having an aggregate turnover of fifty lakh rupees made on or after the 1st day of April in any financial year, is liable to discharge GST Tax @3% under CGST and @3% under SGST Acts.
6.If Freelancer obtained GST registration, is he eligible to claim ITC on all his purchase of goods or services or both?
Yes, Freelancer is eligible to claim ITC on all his purchase of goods or services or both like rent paid to the office premises, purchase of computers, telephone bills , GST paid on bank charges in the course of business except motor vehicles, food bills etc.. If Freelancer is having composition scheme option under that circumstances he is not eligible to claim any ITC on his purchases. If he has withdrawn composition scheme under that circumstance he is eligible to claim ITC from the date of withdrawn Composition scheme.
7.If Freelancer wants to provide “Export of Services”, what are the conditions to be fulfilled under GST?
If the Freelancer wants to provide “Export of Service” under GST, the following conditions are required for export of services:-
- Client is located outside India,
- Person providing services is located in India,
- Payment must be received in convertible foreign currency. This doesn’t mean you must receive foreign currency in your bank account and Freelancer is also having Foreign Inward Remittance Certificate (FIRC) for the transaction.
8. If Freelancer has export of services, is he liable to pay IGST Tax or file Letter of Undertaking under GST Law?
If the freelancer is having export of services, he wants to providing export of services without payment of tax, he can file Letter of Undertaking (LUT) to the concerned jurisdictional officer, under that circumstances he is not required to charge IGST Tax on such export of services in his Tax Invoices. If he has not filed any Letter of Undertaking to the concerned jurisdictional officer, under that circumstances he has to pay IGST on such export of services Tax Invoice and he may apply for refund of such GST tax paid by filling GST Refund Forms like RFD-01 etc.,
9.Is it required to collect Tax Collected at Source under GST and if liable to collect TCS, what is the rate?
As per Section 52 of CGST Act,2017, Freelancer is registered in India and thus liable to collect Tax Collected at Source (TCS) at the rate of @1% on amount paid through them. Upwork is also collecting Tax Collection at Source (TCS) @1%from all the freelancers’ irrespective of registration under GST.
10.If the freelancer has obtained GST registration and what returns are liable to file and when to be filed?
If the freelancer has obtained GST registration to providing services by way of intra -State or Inter-State or Export to Outside India, he has to file monthly or quarterly based on his turnover. If his annual turnover is up to Rs.5Cr he can file Form GSTR-1 and Form GSTR-3B returns quarterly but tax shall be paid on monthly basis as per notification issued by CBIC from time to time. If the freelancer is having his annual turnover is more than Rs.5Cr , he shall file Form GSTR-1 and Form GSTR-3 on monthly basis and discharges GST tax as per Form GSTR-3 as per prescribed due date in the CGST Act,2017.
11.If the freelancer is unable to file GST return within due date, is he liable to pay any penalty or Interest?
Yes. If the freelancer is not filing GSTR returns within prescribed due date, he is liable to pay penalty as per law and also liable to pay interest as per section 50(1) of CGST Act,2017.
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