What are the pros of becoming a freelancer?
Freedom from a 9-to-5 job;
Flexibility of working from anywhere, anytime;
Opportunity to work with clients located in different time zones, industries and operating at a different scale.
What are the cons of freelancing?
There could be many but the biggest con or concern – A freelancer has to act as a sole business owner or a solopreneur for tax compliance purposes.
What does it mean? – You have to carefully analyse your liability to get a GST registration, pay taxes and file the returns timely and manage all compliances as applicable to a sole proprietorship.
Complying with GST rules can become a cumbersome task, but SahiGST, your dear GST friend, is here to help you in managing the taxes hassle-free.
Let’s delve deep into the provisions and analyse how GST is applicable to the freelancers -
When is a freelancer liable for a GST registration?
Since freelancers are service providers, they are liable to get themselves registered under GST if their gross receipts (income earned from the clients) crosses ₹ 20 lakhs (₹ 10 lakhs for special category states) in a financial year.
However, to increase trust and look more credible, a freelancer may opt for GST registration voluntarily even if his gross receipts are less than ₹ 20 lakhs/ ₹ 10 lakhs.
Even if a person opts for GST registration voluntarily, he will have to fulfil all the compliances applicable to other registered taxpayers.
Is a freelancer eligible for composition scheme?
In normal cases, the registered taxpayer has to collect GST from the customers or clients and pay it to the Government. Also, he has to maintain requisite books of accounts and other information as required under the GST law and file the returns every month/ quarter.
However, to benefit the small businesses, the Government has extended the composition scheme to service providers as well.
If a freelancer opts for composition scheme, he has to pay GST at a flat rate of 6% to the Government. In such a situation, he can not collect any GST from the customers. Furthermore, he is not required to maintain the accounting records as detailed as normal taxpayers.
However, a composition scheme taxpayer can’t claim an input tax credit of GST paid on the purchase of any goods or services for official purpose.
All in all, a freelancer is recommended to opt for the normal scheme (i.e. collect GST from the customers and pay it to the Government after claiming input tax credit).
What is the normal tax rate applicable to a freelancer?
Usually, a freelancer has to charge GST at 18% for the services provided, unless a GST rate is specifically mentioned for services provided by him.
Hence, if he is providing services worth ₹ 1,00,000 to a client, he has to charge GST at 18% i.e. 18,000 and add it in the invoice. The total taxable value will be ₹ 1,18,000.
How can freelancers use SahiGST to file the returns smoothly, easily?
The most crucial aspect of GST compliances is return filing process. Some freelancers have to file the returns monthly, while others have to do it quarterly according to the quantum of turnover.
When you feed the basic details in SahiGST software, it automatically selects the frequency of return filing according to the applicable laws so you don’t have to remember the return filing frequency and dates manually.
It also sends timely reminders and notifications on the registered mobile number and Email ID about the tax payment and returns filing due dates.
Whenever a freelancer issues an invoice to the client, he can upload it on SahiGST software portal as well. During the return filing time, the software will consolidate all the invoices on a single click and prepare it in return format.
After reconciling the details, you can file the return from within the system hassle-free.
Also, SahiGST takes care of all the tax calculations after taking into account input tax credit so you don’t lose on any benefit.
For freelancers, SahiGST acts like a friend more than software – it takes all your tax-tensions away so you can focus on growing your freelancing business and fetch high-paying clients, while it manages the GST compliances itself.