Weather Freelancer is liable to be register
We know that under the GST law, mandatory registration needs to be obtained in the following situations:
- 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’)
- When the service provider provides interstate supply of service. For example, a freelance software developer in Bangalore provides service in Mumbai, then he will have to obtain mandatory registration.
- Cases when there is an export of service. For example, if a person writes an article for an organization in the UK and the amount is paid to the person in Pounds (receipt should be in foreign exchange), then it will be considered as an export of service.
Composition scheme is not applicable to a service provider except a service provider providing restaurant service. Based on the above, we can conclude that composition scheme is not applicable for a freelancer.
Rate of tax applicable
The rates of tax under GST are 0%, 5%, 12%, 18% and 28%. The services will be taxed as per the respective slab rates. If nothing is specified, 18% would be the applicable tax rate.
Rules for Invoicing
The invoice raised by the freelancer shall be according to the GST laws. The invoice should contain name, address, GSTIN of the supplier as well as the recipient, SAC of services, date, value, and signature
INPUT TAX CREDIT (ITC)
The freelancer, like any other taxpayer under the GST is allowed to take the input of the services used by him for the purpose of rendering service. For example, he may be using a laptop, electricity, telephone etc to provide taxable service.
Further, the tax being charged by the freelancer can also be taken as input by the recipient of service. Therefore, we can conclude that the burden of GST does not fall on the freelancer nor will his fee be reduced as he will be collecting the extra tax amount from the customers.
Returns be filed
If a freelancer does not opt to register and collect GST, it is not that the Government will not be able to track it. The department will still know about his turnover either if TDS is deducted in his case (by the person making payment to him) or through the payments in his bank accounts. Since all accounts are Aadhar and PAN linked, it is tough to escape from the eyes of Law.
We can now comprehend that a freelancer is bound by the laws of the Act and non-compliance may result in a penalty. To avoid the same, expert advice is recommended for registration, return filing and invoicing.
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