Freelancers Under GST – An overview


Freelancers Under GST – An overview



After the introduction of the Goods and Services Tax (GST), a broad range of service providers, including freelancers, became subject to taxation. Before we discuss the various aspects of freelancers under GST, you must know what a freelancer is. A freelancer is not under the employment of a single organisation. They can simultaneously work under contracts for different organisations and charge a fee for their services.

Whether a ‘Freelancer’ is liable to be registered?

We are aware that the following circumstances need required registration under the GST law.

  • When the turnover crosses the threshold limit of Rs. 20 lacs (general cases)
  • When the turnover crosses the threshold limit of Rs. 10 lacs (specific cases of North-east states)
  • For services covered under Online Information and Database Access and Retrieval services (‘OIDAR’)
  • In case of export of services, since a mandatory GST registration is required for any inter-state supply of goods/services. Export of services is termed as “zero-rated supplies” and qualifies as “inter-state supply” under the IGST Act.

What are OIDAR services?

OIDAR services covered by the GST Act consist of the following:

  • Internet-based advertising
  • Providing cloud service
  • Provision of e-books, music, movie, software and other intangibles via the internet
  • Providing data or information, retrieval or otherwise to any person in electronic form through a computer network
  • Online gaming

Applicable Tax Rates

To get a complete picture of freelancers under GST, you must know the applicable tax rates for providing freelancing services. Depending upon the category of services, freelancers are subject to four different tax slabs:

5% GST

12% GST

18% GST

28% GST

Remember, if the category of service cannot be specified, a GST rate of 18% is applicable.

Is Composition Scheme Applicable to Freelancers?

The union government announced the composition scheme in 2019. Under the scheme, freelancers with an annual income of less than Rs. 50 Lakhs can opt to pay GST at a nominal rate. According to the provisions, those opting for the scheme have to pay a GST rate of 6%, comprising 3% as Central Goods and Service Tax and 3% as State Goods and Service Tax, on a quarterly basis.

Input tax credit

Input tax credit is the amount of GST paid on purchases, which can therefore be deducted from the GST payable to the government.There is no input tax credit for self-employed people. They can claim GST credit on all business purchases like rent, phone bill, computer, laptop etc. except for some purchases where ITC is not allowed like purchase of motor vehicles, food bills etc..

Invoicing rules for freelancers

Freelancers must follow invoicing rules as per GST Act 2017. Similar to other service providers, the freelancer must provide the following information in the invoice:

  • Name, address and Goods and Service Tax Identification Number (GSTIN) of the service provider
  • Name, address and Goods and Service Tax Identification Number (GSTIN) of the beneficiary
  • Service Accounting Code (SAC)
  • The date on which the service was provided
  • Cost of services
  • Signature of the service provider

Returns to be Filed by Freelancers

Along with filing the mandated monthly or quarterly GST returns, a freelancer has to file an annual return as well. It is compulsory for freelancers registered under the GST Act to file the correct returns within the stipulated date. Non-filing of returns can result in the imposition of stiff penalties. As the bank accounts of all service providers, including freelancers, are now linked with their PAN details and Aadhaar numbers, it is impossible to evade taxes.



Krishnakant Jakhotia

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