GST for Freelancers

"As a freelancer, you are not just your own boss — you're also your own CFO. Understanding GST isn’t paperwork, it’s power."

Hey there, Freelancer!

You're building websites, writing content, consulting, designing logos, or running campaigns from your laptop, sipping coffee at your favorite café or from your home office.
Let’s find out if GST applies to you. Ready?
👉 Let’s go!

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Step 1: Who Are You?

Choose the one that best describes you:

• A freelance developer/designer/marketer/writer/consultant
• Working with Indian and/or international clients
• Earning money independently, not on payroll

👉 If that’s a yes to all, congrats, you’re a freelancer and legally seen as a business in India.

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GST Basics for Freelancers: An Explained Snapshot

Criteria	GST Requirement	Example
Income < ₹20 lakh/year	GST not mandatory	Ria, a freelance graphic designer in Mumbai, earns ₹12 lakh/year. She doesn't need to register for GST but can do so voluntarily.
Income > ₹20 lakh/year (₹10L for NE & hill states)	GST registration mandatory	Aditya, a freelance digital marketer in Delhi, earns ₹25 lakh/year. He must register for GST, charge 18% GST on invoices, and file returns.
Providing inter-state services (within India)	Exempt up to ₹20 lakh, per Notification 10/2017-IGST	Neha, a consultant in Bengaluru, works with a client in Pune. Even though it’s interstate, she’s under ₹20L/year → no GST needed (but keep an eye on income!).
Exporting services (foreign clients)	Allowed with Letter of Undertaking (LUT); GST not charged	Rahul, a web developer in Kolkata, works for clients in the US and UK. He registers for GST + files LUT → doesn’t charge GST, but can claim Input Tax Credit on expenses like hosting and internet.
Importing services/tools (like Canva Pro, Adobe, Zoom)	GST applies under Reverse Charge Mechanism (RCM)	Tina subscribes to Canva Pro (USD 12.99/month) from Australia. She's registered under GST → she must self-pay 18% GST under RCM and can claim ITC later.

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1. Inter-State Services (within India) – You’re Exempt (if income < ₹20L)

Scenario: You’re in Chennai and work with a client in Mumbai.

• If your income is under ₹20L/year, you're exempt from GST, even though the service is inter-state.
• Once you cross ₹20L, GST registration is mandatory, and you must charge 18% IGST on inter-state invoices.

Key reference: Notification No. 10/2017 – Integrated Tax

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2. Exporting Services (Clients Abroad)

Zero-rated supply under GST means you don’t charge GST, but you’re still eligible to:

• Register for GST
• File LUT (Letter of Undertaking) on GST portal (so you’re not forced to charge GST on export invoices)
• Claim Input Tax Credit (ITC) on eligible expenses

Example:
You design a website for a client in Canada for ₹1,00,000. You:

• Send an invoice in foreign currency
• Show payment received in convertible foreign exchange (e.g., via Wise or SWIFT)
• File the invoice under LUT — no GST charged
  You can claim ITC on your expenses like laptops, subscriptions, coworking fees.

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3. Importing Services (RCM: Reverse Charge Mechanism)

If you buy a service from abroad (B2B), you’re responsible for paying GST in India — even though the seller is outside India.

Example:

• You pay $12.99/month to Canva Pro
• That's approx. ₹1,080/month
• As a GST-registered freelancer, you must self-pay 18% GST (₹194.40) under Reverse Charge Mechanism
• But the good news: You can claim that GST back as ITC

This applies to other digital tools like:

• Zoom
• Adobe CC
• Figma Pro
• ChatGPT Plus

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📍 States with ₹10 Lakh Threshold for GST

For residents of certain special-category states, the exemption limit is ₹10 lakh instead of ₹20 lakh:

🗺️ Uttarakhand | Arunachal Pradesh | Assam
J&K | Manipur | Meghalaya | Mizoram
Nagaland | Sikkim | Tripura | Himachal Pradesh

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🧾 Benefits of Voluntary GST Registration

Even if you're under the threshold, registering voluntarily can help you:

• Claim Input Tax Credit (ITC)
• Export services without paying GST (via LUT)
• Appear more credible to clients
• Claim refunds for taxes paid on tools and ads

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❓ Can a Freelancer Register Under the GST Composition Scheme?

• Under the GST Composition Scheme, businesses with a turnover of up to ₹1.5 crore can pay tax at a fixed, lower rate instead of regular GST rates. However, freelancers — who are typically service providers — are generally not eligible for this scheme.
• An exception exists under Section 10(2A) of the CGST Act, where service providers (including freelancers) with an annual turnover up to ₹50 lakh can opt for the composition scheme and pay tax at 6% (3% CGST + 3% SGST).
• So, while most freelancers cannot register as composition dealers under the general provisions, they can opt in under Section 10(2A) if their services and turnover fall within the specified limits.

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Regular vs Composition Scheme

REGULAR SCHEME	COMPOSITION SCHEME
Charges GST (18%)	Cannot charge GST
Claim ITC	No ITC
Ideal for inter-state/export	For local, small providers
File monthly/quarterly GSTR	Simplified quarterly returns
Higher compliance	Pay flat 6% tax rate on turnover

Note: Freelancers serving international or out-of-state clients cannot opt for the Composition Scheme.

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GST on Freelancing Services – What’s the Rate?

For most digital services provided by freelancers, GST is charged at 18%.

Examples:

• Software / Web Development
• SEO & Digital Marketing
• Graphic Design
• Translation / Voiceover
• Consulting / Training
• Hosting, Cloud, SaaS Subscriptions

🔗 Check GST Rate at CBIC

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Is a Freelancer Eligible to Claim Input Tax Credit (ITC)?

Yes! If you're a freelancer registered under GST, you're eligible to claim Input Tax Credit (ITC) on business-related expenses. This helps reduce your GST liability and overall cost of operations.

Common Expenses Eligible for ITC:

• Software subscriptions (e.g., editing tools, cloud storage)
• Laptops, printers & other office equipment
• Internet and mobile bills used for business
• Professional services like CA fees, legal consultancy, etc.

To Claim ITC, Ensure You:

• Keep proper GST-compliant invoices for all purchases
• Use goods/services exclusively for business purposes
• File your GST returns (GSTR-3B & GSTR-1) on time

Note: ITC cannot be claimed if you opt for the Composition Scheme or use goods/services for personal purposes.

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Invoicing Guidelines for Freelancers

Every GST-compliant invoice must include:

• Your Name, Address, GSTIN
• Client’s Name, Address, GSTIN (if any)
• Invoice Number & Date
• Description of Services
• SAC Code
• GST % (if applicable)
• Value in INR (for export invoices)

👉 For export invoices under LUT, add:
“Export of Services without payment of GST under LUT”

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Export of Services – No GST with LUT

Conditions to Qualify as Export:

• Client outside India
• Payment received in foreign currency
• Services performed in India
• FIRC/e-BRC available as proof

File Letter of Undertaking (LUT) annually to avoid GST and simply file returns.

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FIRC vs e-BRC (Comparison)

Aspect	FIRC	e-BRC
Use Case	General proof of foreign remittance	Export-related proof for policy benefits
Issued By	Bank or Payment Gateway	Bank (digitally signed)
Required For	GST refunds, service export compliance	Foreign Trade Policy benefits

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Reverse Charge Mechanism (RCM)

When does it apply?

• You import services (e.g., use Canva, Payoneer, Upwork fees)
• The foreign supplier doesn’t charge Indian GST
• Then you must pay GST under RCM and report it in GSTR-3B

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Documents Needed for GST Registration

Personal:

• PAN, Aadhaar, Photograph

Business:

• Electricity Bill/Rent Agreement/NOC

Banking:

• Bank statement / Cancelled cheque

Other:

• Digital Signature Certificate (DSC)

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GST Return Filing Rules for Freelancers

Annual Turnover	Return Filing
Up to ₹5 crore	Quarterly GSTR-1 & 3B (Optional)
Above ₹5 crore	Monthly GSTR-1 & 3B
Above ₹2 crore	Annual Return (GSTR-9)
Above ₹5 crore	GSTR-9 + Reconciliation (GSTR-9C)

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GST Refunds for Freelancers

Applicable in these cases:

1. Export of services (with or without tax)
2. Input services used for export (e.g., design tools, hosting)

Conditions:

• Must file within 24 months of export month
• FIRC / e-BRC is mandatory
• File via Form GST RFD-01

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Final Tips for Freelancers

• Keep all invoices organized and in INR (even if billed in USD/EUR)
• Use RBI/FBIL exchange rates for conversion
• Maintain records of all payments, GST returns, and expenses
• File LUT before beginning any export of service
• If using platforms like Payoneer or Upwork, get FIRCs
• Understand when you must pay GST under RCM

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Need help with GST registration, LUT filing, or refunds?

Contact Multigyan Team — we assist freelancers end-to-end with GST compliance tailored for digital workers.