Freelancing has become an increasingly popular way for individuals to offer their skills and services in today's digital age. Whether you're a graphic designer, content writer, web developer, or provide any other service, understanding the Goods and Services Tax (GST) and its applicability is crucial for freelancers. In this article, we'll delve into the GST framework for freelancers and explore the tax rates that apply to their income.

GST Applicability for Freelancers

Goods and Services Tax, commonly known as GST, was introduced in India to streamline and simplify the indirect tax structure. It applies to the supply of goods and services across the country. Freelancers, who offer services, fall within the purview of GST, and they need to adhere to its regulations. Here's a breakdown of the GST applicability for freelancers:

1. Threshold Limit: Freelancers with an annual turnover of less than Rs. 20 lakhs (Rs. 10 lakhs for special category states) are not required to register for GST. This threshold limit was implemented to relieve small businesses and freelancers from the compliance burden.

1. Mandatory Registration: If a freelancer's turnover crosses the threshold limit, GST registration becomes mandatory. It's important to note that registration must be done within 30 days of reaching this threshold.

1. Voluntary Registration: Freelancers with a turnover below the threshold limit can opt for voluntary GST registration. This can be beneficial for those looking to claim input tax credit on their business expenses.

1. Interstate Services: If a freelancer provides services across state lines, GST registration is mandatory regardless of turnover. Interstate supplies are always subject to GST.

GST Tax Rates for Freelancers

The GST tax structure for freelancers is divided into multiple slabs, primarily 5%, 12%, 18%, and 28%. The applicable tax rate depends on the nature of the service provided. Here's a breakdown of the tax rates:

1. 5% GST: Many freelance services, such as content writing, are subject to a 5% GST rate. This lower rate is applicable to services that are considered essential and do not fall under higher tax brackets.

1. 12% GST: Services like website design and hosting, which fall under the IT sector, attract a 12% GST rate. This rate is higher than the 5% rate but still relatively moderate.

1. 18% GST: Certain services, including graphic design and advertising, fall under the 18% GST slab. These services are considered non-essential and are taxed at a higher rate.

1. 28% GST: The highest GST rate of 28% is typically reserved for luxury and premium services. Freelancers offering high-end consulting or specialized services may fall under this category.

It's crucial for freelancers to correctly determine the applicable GST rate for their services to avoid any compliance issues. Additionally, freelancers who are GST-registered can claim input tax credit on the GST they pay on business-related expenses, effectively reducing their overall tax liability

GST Registration for Freelancers – Exporting Services

According to Section 24 of the Central GST Act, an individual who earns an income from outside the country or the state, is liable to get themselves registered with GST and no threshold limit is applicable. To be more precise, the exemption of INR 20 Lakhs is only relevant to small business who earn their revenue from clients and entities present within the state. Hence, GST registration is mandatory for every freelancer who exports services outside the state or the country and earns revenue from the same, with any exemption limits. As indicated in the GST laws formulated by the Government, freelancing services are categorised under database access and online information.

Penalties

When a freelancer fails to register themselves for GST, they would be liable to pay penalties. The penalty for not registering goes upto INR 25,000, and a penalty of INR 100 would be applicable for not filing GST returns.