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GST on freelancer services

Who is a freelancer?

A freelancer is a person who works on various engagements on a contractual basis and is not committed to a particular employer long-term. Freelancing work includes accounting, data entry, designing, software development, consultancy services, etc.

All GST compliances relating to service providers shall apply to freelancers.

When is a freelancer required to register under GST?

Freelancer will have to register for GST online in the following situations-

(a) Aggregate turnover of services exceeds GST threshold of Rs 20 lakhs in states other than north-eastern states

(b) Aggregate turnover of services exceeds GST threshold of Rs 10 lakhs in following north-eastern states -

  • Uttarakhand
  • Arunachal Pradesh
  • Assam
  • Jammu & Kashmir
  • Manipur
  • Meghalaya
  • Mizoram
  • Nagaland
  • Sikkim
  • Tripura
  • Himachal Pradesh

(c) Providing Online Information and Database Access and Retrieval services (OIDAR)

(d) Providing services outside India and value of services exceeds Rs 20 lakhs (Export of service)

What are Online Information and Database Access and Retrieval services (OIDAR)?

OIDAR services are a category of services provided through the internet and received by the recipient online without having any physical interface with the supplier of such services. E.g.- advertising on the internet, online gaming, cloud services, online supplies of digital content, digital data storage.

As per section 24 of CGST Act, the OIDAR services provider has to obtain compulsory GST registration. Therefore, freelancers engaged in OIDAR services will have to obtain GSTIN irrespective of aggregate turnover in the year.

Freelance services provided outside India

As per section 2(6) of IGST Act, services provided by the freelancers to any person located in foreign countries shall be considered as export of services if the following conditions are satisfied-

  • The location of the freelancer is in India
  • The location of the recipient is outside India
  • Place of supply of services is outside India
  • Payment for services was received in convertible foreign currency
  • Freelancer and the recipient of service are not merely establishments of a distinct person. if the place of supply is out of India

Once the service provided by the freelancer is treated as an export of service, need to determine the requirement of registration under Goods & Services Tax. if the value of services exceeds 20 lakhs, the freelancer has to take GSTIN to provide services outside India.

Registered freelancers have two options to export services in the GST regime.

Option 1: Export services without payment of tax under bond or letter of undertaking (LUT)

Option 2: Export services with payment of tax and later claim a refund

GST rate on freelance services

GST rate would be 18% for freelance services if no specific rate is notified.

SAC code for freelance services

SAC code stands for Service Accounting Code. Under Goods & Service Tax, all tax invoices issued by the service provider must contain respective SAC code. SAC code applicable on freelance services is given in the below table-

(Group 99831)

SAC Code

Management consulting and management services, information technology services

998311

Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management.

998312

Business consulting services including pubic relations services

998313

Information technology (IT) consulting and support services

998314

Information technology (IT) design and development services

998315

Hosting and information technology (IT) infrastructure provisioning services

998316

IT infrastructure and network management services

998319

Other information technology services

 

GST composition scheme

A composition scheme is an optional scheme of levy of tax available for small taxpayers in the GST regime. Earlier, the scheme was available to only the suppliers of goods. However, notification no 2/2019-Central Tax (Rate) notified the composition scheme for the supplier of service also from 1 April 2019. Under this scheme, tax is levied at a reduced rate with fewer GST compliances. 

Service providers having an annual turnover of less than Rs 50 lakhs can opt for a composition scheme in GST. Freelancers opting for a composition scheme are required to pay GST at a rate of 6% subject to certain conditions & restrictions.

Invoicing rules

Any invoice issued by the freelancer should be as per GST rules. The invoice must have all the mandatory fields such as invoice number, date, shipping address, billing address, place of supply, SAC code, value, and signature.


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CA Anand Singh

CA Anand Singh

I am a practising Chartered Accountant with 6 years of experience in Direct and Indirect Taxation, FEMA, Corporate Law and Audit etc.