Who needs to register for GST in India? 

GST registration may sound like a lot of work. But did you know it is not mandatory for all? Here are the situations that require GST registration:

• If your business’s turnover exceeds Rs. 20 lakhs in a financial year for normal category states. For individuals living in special category states, the limit is Rs.10 lakhs.
• You receive payment for services under OIDAR (Online Information and Database Access and Retrieval). OIDAR includes activities, such as internet advertising, cloud-based services, and intangible items, such as e-books, entertainment (music, movies, online gaming), software, and any other electronic data, such as video lessons.

Why is GST for freelancers important? What are its advantages?

Because the Goods and Services Tax (GST) is an indirect tax on the supply of goods and services in India, Indian freelancers must also pay GST when their turnover exceeds Rs. 20 lakhs in a financial year. 

As freelancers, you do not receive any specific advantages of registering for GST. The benefits of GST registration are the same for everyone. Under this new GST regime, you have the option to file tax returns online. All you have to do now is go to the GST Portal, create an account, log in, and begin filing your GST returns.

The main advantage is that if you register, you will be able to claim GST credit, which may be used to balance future GST liabilities, as well as seek a GST refund (subject to certain conditions). For example, if your firm runs ads on Google to attract new clients or customers, you have to pay 18% of the total amount as GST.

Documents needed for GST registration 

Here are the documents you will require to register for GST:

1. Your photo
2. A copy of your PAN and Aadhaar card
3. Identification and residence evidence
4. A recent bank account statement or a cancelled check
5. Your digital signature
6. Electricity or telephone bill
7. Office lease agreement
8. No objection certificate

What happens after GST registration?

After you have submitted all the documents required and completed all the required formalities, you need to ensure that you follow the process to be on the right side of the law. 

When raising an invoice, you need to add the GST amount to the overall billed amount. Thus, if your billed amount is Rs. 25,000 for one client, after adding GST at the rate of 18%, the total amount that your client needs to pay will be Rs. 29,500. 

After collecting GST, you need to deposit the GST amount to the government when you file your GST returns.  

Payments T&C for freelancers

There are many terms and conditions (T&C) related to payments that apply to GST-registered freelancers.

• Depending on the type of service you provide, GST rates on your services can be 0%, 5%, 12%, 18%, or 28%. If there is no specific percentage, you need to charge your clients GST at the rate of 18%.
• After getting your GST identification number, you have to file GST regularly, i.e., monthly and yearly. This is irrespective of your current annual turnover.
• You need to make all payments online. Every year, there will be 37 returns to file: three monthly filings and one annual form.
• If you do not deposit the GST proceeds on time, you might have to pay a fine.
• To ensure that GST is deposited on time, you can issue the invoice on the 1st of the following month. This will give you enough time to pay your monthly GST bill.
• After paying all the applicable taxes, you need to submit a monthly summary return under GSTR 3B.

Do freelancers need to register for GST if they raise invoices?

• If you are a freelancer, your clients will expect you to raise invoices. When you submit an invoice, your client may deduct 10% TDS from every invoice.
• If your income is below Rs. 20 lakhs or Rs. 10 lakhs (for special category states), it is not compulsory to register for GST even if you raise invoices.
• GST-registered freelancers need to file invoices according to the latest GST laws stated by the government.
• You need to include your name, address, GSTIN for freelancers, your client’s GSTIN, Service Accounting Codes (SAC), date, amount, and signature on the invoice.

To sum it up

As all your accounts are linked with PAN and Aadhaar, the best option would be to go for GST registration.GST filing may be a little intimidating for many freelancers. Hiring a chartered accountant (CA) who has experience working with freelancers and solopreneurs will help you ensure everything is in line with the latest applicable laws.

Also read: GST Registration Guide for Startups and Small Businesses

The post GST For Freelancers: Everything You Need to Know appeared first on PayU Blog.

Table of contents

What is goods and services tax (GST)?

It is a tax reform that came into existence on 29th March 2017 by an act of parliament and has replaced many indirect taxes such as VAT, excise, service tax, etc.

A comprehensive destination-based tax, GST is levied on the supply of goods and services at every point of sale. For example, you are a wholesale merchant and sell goods to Mr X, a retailer, who further sells it to Mr Y, the consumer. At first, the tax is levied on the purchase made by Mr X from you. Then, the tax is further levied on the purchase made by Mr Y from Mr X.

A unique number called GST registration number is allotted to every business registered under GST.

Types of GST

In India, there is a dual GST system in which the central and state governments levy taxes simultaneously with a common tax slab. However, GST is mainly categorized in three simpler terms:

State Goods and Services Tax (SGST) – taxes levied by the state government or union territory (UT) on goods and services manufactured or sold within state or UT boundaries.

Central Goods and Services Tax (CGST) – taxes levied by the central government on any intra-state transactions for goods or services.

Integrated Goods and Services Tax (IGST) – taxes levied by the central government when a transaction of goods or services takes place within two different states. The state and central government share the tax levied equally.

Advantages of GST registration for startups and small businesses

GST for small business and startup provides these advantages:

• If you file your return under GSTR-1 and GSTR-3B, no late fee will be charged as per the 31^st GST council’s declaration to boost Startups and SMBs.
• Starting a business in India is now a lot easier. SMBs and startups can go ahead with only GST registration. Earlier, the process was a bit complex.
• Simplified indirect tax system to one uniform system. Ever since GST came into existence, a lot of indirect and direct taxes have been subsumed such as excise, VAT, etc. This has made the tedious process of filing and managing taxes much simpler.
• Easy compliance and requirements
• Paperwork efficiency and ease of logistics towards dense locations of client

Exemptions under GST for startups and small businesses

There are no complex criteria for eligibility for GST registration. In fact, businesses with a turnover of under Rs. 40 lakhs per year don’t need to register under GST. As a result of this exemption, many startups and small businesses that fall under the category of Rs. 5 lakh – Rs.40 lakh income can grow without having to worry about filing GST returns.

How to register a startup or small business under GST

Wondering how to register a small business in India? It’s quite simple to register your business under GST online. There are a few GST registration requirements. Just follow the steps given below:

• Go to the GST portal at https://www.gst.gov.in/. Click on ‘Services’ and then select ‘New Registration’ under ‘Registration’.

• Generate a temporary reference number (TRN) by filling in the details given below such as PAN, email ID, and mobile number, and click on Proceed.

• Enter the OTP received on the given mobile number or email ID and validate it. 

• Once you validate your number, a TRN will be allotted. Use it to log in again to complete the GST registration process and requirements. 

• Login to the portal using the TRN, enter the captcha and complete OTP verification. Click on the pencil icon below ‘Action’. 

• Enter all the information about your business such as trade name and composition scheme. Click on ‘Save & Continue’. 

• On the next screen, provide information about all the promoters and directors of your business. Or you may enter the details of the proprietor in case of proprietorship. You can enter the details of up to 10 promoters or partners on the portal. Then, click on ‘Save & Continue’. 

• Enter the details of the authorized signatory nominated by the promoters to file GST returns of the business. 

• Submit the details of the principal place of your business such as an address, official contact details (email, phone no., etc.), nature of possession and others. Upload relevant proofs of the same and click on Save & Continue. 

• Enter additional place of business details. For example, if you have an eCommerce business and use Amazon’s warehouse then the details of the warehouse must be given in this section.  

• Provide the details of the top five goods and services you supply. Fill in the HSN code for goods and SAC code for services. 

• Verify the details submitted. Once it’s completed, select the verification check box and e-verify the name of the authorized signatory. 

• After the signature verification, a success message will appear on the screen, and an Application Reference Number (ARN) will be generated. Use it to track the status of your application. Once the process is complete, you will be informed about the allotment of a GST number. 

Conclusion

GST registration process for startups and small businesses is much simpler now. Just as a startup becomes successful when the idea behind it is properly executed likewise if GST is implemented properly, it helps a lot in achieving the financial goals easily.

The post GST Registration for Startups and Small Businesses in India | A Quick Guide appeared first on PayU Blog.