Background
The rise of the gig economy and remote work has led to an explosion in the number of freelancers, consultants, and independent professionals in India. From designers to developers, marketers to management consultants, thousands are tapping into both domestic and international opportunities-often right from their laptops at home. But with this freedom comes a not-so-fun companion: tax compliance, especially under the Goods and Services Tax (GST) regime.
Many freelancers are confused-Do I need a GST number if I work for a US client? What happens if I get paid in dollars? Can I claim a refund without paying GST? What if I earn below Rs 20 lakhs? These are not just compliance queries; they directly impact your profitability, client relationships, and cash flow.
This article demystifies GST for freelancers and consultants, covering registration, invoicing, LUTs, exports, refunds, and more-with authentic references to the law (sections, rules, circulars, and forms). Whether you're billing in rupees or rupees earned from abroad, here's everything you need to know to stay compliant-and get your due.
1. GST for Freelancers: Who Needs to Register?
Freelancers and independent consultants are classified as service providers under the Goods and Services Tax (GST) regime. As per Section 22 of the CGST Act, 2017, any person supplying taxable services with an aggregate turnover exceeding Rs 20 lakhs (Rs 10 lakhs in special category states) in a financial year must register under GST. Importantly, even those below this threshold may require registration if they make inter-state supplies or want to claim Input Tax Credit (ITC) or export benefits. However, Notification No. 10/2017 - IGST (Rate) dated 13.10.2017, amended by Notification No. 10/2019 - IGST (Rate), provides relief by exempting certain inter-state service providers (below threshold) from registration requirements.
2. Domestic Clients: Taxable Supplies and Invoice Requirements
When services are provided to Indian clients, GST applies at the standard rate-typically 18% under SAC codes like 9983 (Other professional services) or 998314 (IT design & development).
Freelancers must collect this tax from clients and remit it to the government. Every invoice issued must conform to Rule 46 of the CGST Rules, which prescribes mandatory fields such as name, address, GSTIN, invoice number and date, description of service, SAC code, tax rate, amount, and place of supply. For domestic B2B clients, freelancers must ensure the client's GSTIN is captured to allow ITC flow.
3. Serving Global Clients: Is It an Export of Service?
Services rendered to foreign clients can qualify as "export of services", which are treated as zero-rated supplies under Section 16 of the IGST Act, 2017. To be considered an export, the transaction must meet five key conditions laid out in Section 2(6) of the IGST Act:
- The supplier is located in India,
- The recipient is located outside India,
- The place of supply is outside India (as per Section 13),
- The payment is received in convertible foreign exchange or INR as permitted by RBI, and
- The supplier and recipient are not merely establishments of the same person.
If these are satisfied, no GST needs to be paid on the outward supply, and the freelancer can claim a refund of input taxes.
4. Two Ways to Export: LUT or Pay IGST
Freelancers exporting services can choose between two modes under Section 16(3) of the IGST Act:
- Export under LUT (Letter of Undertaking) without paying IGST, and claim refund of unutilized ITC.
- Export with IGST payment and claim refund of IGST paid.
To use the LUT route, freelancers must submit Form RFD-11 on the GST portal. LUT remains valid for the financial year and needs to be renewed annually. This option avoids blocking working capital. The procedure is governed by Rule 96A of CGST Rules and clarified by Circular No. 37/11/2018-GST.
5. Essential Documents: Invoices and Foreign Remittance Proof
For exports, invoices must clearly state: "Supply meant for export under bond or LUT without payment of IGST" or"Supply meant for export on payment of IGST".Invoices must also mention the foreign client's name, address, and the place of supply as a location outside India. Moreover, freelancers must maintain proof of export consideration received in foreign currency, such as FIRC (Foreign Inward Remittance Certificate) or Bank Realization Certificate, as these are necessary for claiming refunds or to prove that it is indeed an export of service.
6. Claiming Refunds: Don't Miss the Deadline
Refunds for unutilized ITC or IGST paid on exports can be claimed using Form GST RFD-01 as per Rule 89 of the CGST Rules. Supporting documents like invoices, FIRCs, and a statement of export invoices are required. Detailed refund procedures have been outlined in Circular No. 125/44/2019-GST. Refunds must be filed within two years from the relevant date (typically the date of export or receipt of payment, depending on the case).
7. GST Returns: What Freelancers Must File
Once registered, freelancers are required to file:
- GSTR-1: Monthly or quarterly statement of outward supplies.
- GSTR-3B: Monthly or quarterly summary return.
- GSTR-9: Annual return, if turnover exceeds Rs 2 crore.
Even if there are no domestic taxable supplies and only export of services, filing of nil GSTR-1 and GSTR-3B is required, unless the freelancer has opted out of registration.
8. Can Freelancers Claim Input Tax Credit?
Yes. Freelancers can claim Input Tax Credit on goods and services used in the course or furtherance of business. Examples include laptops, internet expenses, software subscriptions, coworking space rent, and other business utilities. However, blocked credits under Section 17(5) of CGST Act- such as personal expenses, food & beverages, or capital goods used for exempt services-are not eligible for ITC. Proper tax invoices and payment to vendors are prerequisites for availing ITC.
9. Voluntary Registration: Should You Opt for It?
Freelancers earning less than Rs 20 lakh may voluntarily register under GST to:
- Claim ITC on purchases and services.
- Export services under LUT and claim ITC refund.
- Build trust with corporate clients by issuing GST invoices.
- Comply easily with foreign clients requiring tax-compliant documentation.
However, once registered voluntarily, all return filing and compliance obligations apply, even if turnover remains below threshold.
10. Summary and Pro-Tips for Freelancers
Understanding GST is crucial for freelancers aiming to scale their business or attract international clients. Registering under GST opens access to input credits and makes it easier to work with MNCs or government clients. However, timely filings, accurate invoices, and maintaining remittance proof are critical for avoiding penalties and ensuring smooth refund claims. Those serving foreign clients must also monitor forex receipts to ensure export benefits are not denied.
Important Q&A on GST for Freelancers & Consultants
Q1: I'm a freelancer earning Rs 12 lakhs per year from Indian clients. Do I need GST registration?
A: Yes, if your turnover exceeds Rs 20 lakhs (Rs 10 lakhs in special category states), GST registration is mandatory under Section 22 of the CGST Act, 2017. However, even below the threshold, you may register voluntarily to claim Input Tax Credit (ITC) or if your clients require GST-compliant invoices.
Q2: I only provide services to foreign clients. Do I need to pay GST?
A: No, if your services qualify as "export of services" under Section 2(6) of the IGST Act, 2017 and you receive payment in foreign currency, the supply is zero-rated under Section 16. You can export either:
- Without paying GST using LUT (Form RFD-11) and claim ITC refund, or
- With payment of IGST and later claim a refund of IGST paid.
Q3: What documents are needed to prove export of services?
A: Key documents include:
- Invoice mentioning "export under LUT" or "export with IGST paid"
- FIRC (Foreign Inward Remittance Certificate) or Bank Realization Certificate
- LUT acknowledgment (if applicable)
- Statement of export invoices and bank statements
Q4: Can I claim GST refund if I export services under LUT?
A: Yes. Under Rule 89 of the CGST Rules, you can claim a refund of unutilized ITC by filing Form GST RFD-01 within 2 years from the relevant date. The refund process and documentation are detailed in Circular No. 125/44/2019-GST.
Q5: Is GST registration mandatory if I provide services to clients in another Indian state?
A: No, Notification No. 10/2017 - IGST (Rate) (as amended) allows inter-state service providers with turnover below Rs 20 lakhs to remain unregistered. However, once registered voluntarily or due to other factors, all GST compliances must be followed.
Q6: Can freelancers claim input tax credit on software, laptops, and coworking spaces?
A: Yes, freelancers can claim ITC on business-related purchases and services like laptops, software subscriptions, internet bills, and coworking space rent, provided they are used for taxable supplies and proper GST invoices are maintained. Blocked credits under Section 17(5) (e.g., for personal use, food, or entertainment) are not allowed.
Q7: What are the key GST returns I need to file as a freelancer?
- GSTR-1: Monthly/quarterly return of outward supplies
- GSTR-3B: Summary return of tax liability
- GSTR-9: Annual return (if turnover exceeds Rs 2 crores)
Even if there is no taxable domestic supply in a month, you must file nil returns to stay compliant.
Q8: What if I forget to file GSTR-1 or GSTR-3B on time?
A: Late filing attracts late fees under Section 47 of the CGST Act - Rs 50 per day (Rs 20 for nil returns) up to a maximum of Rs 5,000 per return. Interest at 18% per annum is also payable on delayed tax payments as per Section 50.
Q9: My foreign client paid in INR via PayPal. Is this still considered export of service?
A: No. One of the key conditions under Section 2(6) of IGST Act for a supply to be considered export is that payment must be received in convertible foreign exchange. If payment is in INR (even from a foreign client), it may not qualify as export and could be treated as a domestic supply - thus liable to GST.
Q10: Can I raise an invoice in USD? What should I do about conversion for GST purposes?
A: Yes, invoices can be issued in foreign currency, but you must convert the value to INR for GST returns using the customs exchange rate notified by CBIC on the date of supply, as per Rule 34 of CGST Rules.
Q11: What if I use platforms like Upwork or Fiverr? Do they deduct GST or am I liable?
A: These platforms often act as intermediaries and may deduct TCS (Tax Collected at Source) or service fees. However, you are responsible for GST compliance on your entire consideration (gross value), not just the amount credited after platform fees. You can claim ITC on platform service charges if GST is charged.
Q12: Can I use the Composition Scheme as a freelancer or consultant?
A: No. As per Section 10(2)(a) of the CGST Act, service providers (except for restaurant services) are generally not eligible for the Composition Scheme, except for those with aggregate turnover up to Rs 50 lakhs, in which case they may opt for the special composition scheme for service providers under Notification No. 2/2019-CGST (Rate), paying tax at 6% (3% CGST + 3% SGST).
Q13: What if I receive an advance payment from a client? When is GST payable?
A: GST is payable at the time of receipt of advance, not at the time of invoicing, as per Section 13(2)(a) of the CGST Act. For services, this means you must pay tax even if the actual work is done later. You must also issue a receipt voucher and later adjust it while issuing the invoice.
Q14: Do I need to issue a tax invoice for every freelance project?
A: Yes. For registered persons, issuing a GST-compliant tax invoice is mandatory under Section 31 of the CGST Act. It should include:
- GSTIN of supplier
- Invoice number and date
- Description of services
- HSN/SAC code
- Taxable value
- GST rate and amount
- Place of supply (especially for exports)
- Signature
Q15: I do graphic design and content writing from India but serve only foreign clients. Should I maintain LUT annually?
A: Yes. Even if you only work with foreign clients and never charge GST, you must renew your LUT every financial year using Form RFD-11 on the GST portal. This enables zero-rated exports without tax payment.
Q16: I earn less than Rs 20 lakhs, but my foreign client asks for a GSTIN on the invoice. What should I do?
A: While you are not mandatorily required to register under GST if your aggregate turnover is below Rs 20 lakhs (Rs 10 lakhs in special category states), export of services is a zero-rated supply and can be done only with a GSTIN and LUT.So, if your client insists on a GSTIN or you want to claim refund of ITC, voluntary registration is advisable under Section 25(3) of the CGST Act.
Q17: What SAC (Service Accounting Code) should I use in my invoices?
A: SAC depends on the nature of services. For example:
- 998313 - IT and software development services
- 998314 - Website & app design services
- 998399 - Other professional servicesAlways mention the correct SAC code in invoices as per Notification No. 11/2017 - Central Tax (Rate) and its amendments.
Q18: Can I issue a single consolidated invoice to my foreign client for multiple services?
A: Yes, you can issue a consolidated invoice provided the nature of services, currency, and period are clearly defined. However, for better audit trails and refund claims, it is advisable to issue service-wise or milestone-based invoices.
Q19: What if my foreign client delays payment beyond 1 year? Will it still be considered an export?
A: No. As per Rule 96A of CGST Rules, if payment in convertible foreign exchange is not received within one year from the date of invoice, the exporter is liable to pay GST along with interest. Hence, always monitor payment timelines closely.
Q20: My bank charges conversion fees for receiving USD payments. Is this GST credit available?
A: Yes. If your bank charges GST on currency conversion or SWIFT charges and issues a GST invoice, you can claim Input Tax Credit under Section 16 of CGST Act, as these are input services used in the course of business.
Q21: What if I provide training sessions to clients abroad through Zoom or Google Meet-will this qualify as export?
A: Yes, if the following conditions are met:
- Recipient is located outside India
- Payment is in foreign convertible currency
- Service is provided over the internet without the recipient coming to India.
- This qualifies as export of services under Section 2(6) of IGST Act and is zero-rated.
Q22: Can I use e-invoicing as a freelancer?
A: E-invoicing is mandatory only for businesses with a turnover exceeding Rs 5 crores (w.e.f. August 2023, earlier Rs 10 crores). If you fall below that limit, e-invoicing is not applicable, but you may voluntarily use GST-compliant invoicing software.
Q23: Is GST applicable if I work for an Indian agency but the end-client is foreign?
A: Yes. If your contract is with an Indian agency and payment is received in INR, your supply is to a domestic registered entity, even if their client is abroad. Hence, GST is applicable, and export benefits do not apply to you.
Disclaimer
The contents of this article are for informational and educational purposes only and should not be construed as professional advice or legal opinion. While every effort has been made to ensure the accuracy of the information, the author and the publisher disclaim any liability for errors, omissions, or consequences resulting from the use of this material. Readers are advised to consult a qualified tax professional or legal advisor for specific guidance related to their individual circumstances under GST law.
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