Is service tax applicable on freelance work received?

Dear Himanshu,

It is the duty of the freelancer to demand for the service tax amount if he has ST registration.

If the freelancer raised the bill and add the service tax amount, then you need to pay the service tax amount. ( Please note that ST is applicable if the turnover of service of freelancer exceed the limit of Rs. 10 Lakh ).

If the freelancer has service tax registration, then it is his responsibility to collect the service tax from you and deposit the same into the account of Govt other wise you should not pay the service tax.

You should treat any payment made to them as an expenses.

Hello Hayedar,

Thank you so much for your quick and "complete" response.

Freelancer is an individual person and I'm quite sure he/she don't have ST registration on their name. Also, payment is made by me via NEFT without adding any ST to the amount on which we agreed for the work. There is no invoice generated by freelancer as he is an individual and not a firm. It is like, we agree upon price, work gets complete, I make payment via NEFT. Do I need an invoice or something from freelancer because I think it is not possible to get one from them.

Also, I'm running a small business which is a service business registered in Sep. 2013. My firm suffered loss of around 2 Lakh in 2013/14 but came to net profit of 4.5 Lakh in 2014/15. Total gross service sales (direct income) for 2014/15 were around 13.5 Lakh. All clients were from abroad. No sales were made in India, however, expenses were paid to Indian & Foreign people.

1. I don't know how to calculate "turnover". Can you please let me know how to calculate it. Is there an easy way to do this in tally.

2. My firm is not registgered in ST, VAT etc. It is just registered under micro enterprise. I wanted to know do I need to register in ST now. I heard that once you're registered in ST then even if turnover is less than 10 Lakh in next year (say 2 Lakh only) then one has to pay ST to govt.

3. When all my sales are made aborad i.e. payments are received from foreign clients do I still need to file for ST even if turnover (sales value) is more than 10 Lakh?

4. #Case: If I made few sales in India around 1 Lakh and around 9 or 10 Lakh sales abroad then also do I have to file for ST registration.

I would be more than delighted to receive answers to these questions which are bugging me for almost a year with no proper guidance and knowledge.

Dear Himnashu,

2. The Service Provider is required to apply for Registration of ST within 30 days of his turnover exceeding 9 Lakhs. However, if the aggregate value of services does not exceed Rs. 10Lakh, in financial year, the service provider can claim the benefit of service tax exemption and he would not be required to pay any service tax on such services provided that you should not collected the Service tax on such services. You only need to file to your ST Return.

Again if you are collecting the service tax, then it is your responsibility to deposit the same into the account of Govt.

3. Yes, you need to file the same whether you received Within India or Outside India.

4. Yes, you need to do the same.

Hello Hayedar,

Thank you for your reply again.

I am confused as what to do now. My sales where around 13.5 Lakh last year (2014/15) and I have not charged service tax in any of the invoice. All sales where from foreign clients. Now how should I go about the service tax?

Now this year apply for the service tax.

Some amount of interest and penalty for non registration will arise.