GST for freelancers

Question: An IT freelancer who is earning more than 20 Lakh in gross receipts in India by providing Technical Services, exclusively to a foreign client located outside india, is he required to register for GST?

Now I am getting conflicting advices and hence trying to find right answer.

(1) Law says if your threshold of gross receipts is above 20 Lakh then GST registration is mandatory.
(2) But Law also says (Section 23 of GST act https://caknowledge.com/section-23-gst/), that if anyone exclusively provides export services for which GST is not chargeable then he does not have to register for GST.

Is it possible for you to throw some light on this?

Hey @ashish_shah,
Registration under GST is required if your ‘Aggregate turnover’ exceeds 20 lakhs.
This aggregate turnover includes export of services i.e. zero rated supplies.

Further, section 23 applies to services on which GST not liable to tax or wholly exempt from tax.
Export of service is liable to tax at ‘zero rate’ and it isn’t wholly exempt from tax. Hence, section 23 is not applicable for export of services.

so @Yash_Kaviya , does that mean the person earning above 20 Lakh in gross receipts
(1) will have to do all compliance related to GST and
(2) get LUT from GST website and
(3) not pay any GST (as export is zero rated)?

So @ashish_shah, you should do compliance and file GST returns

There are two options for you,

  1. Either pay GST on export and get refund.
  2. To get LUT and make export supplies without payment of GST

But @Yash_Kaviya here the person is doing export of zero rated services, so there would be no GST liability.
Only GST filing will be applicable, right? not any actual GST?

Right @ashish_shah, you need to file GSTR for disclosure, there won’t be any tax liability.

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Few more questions @Yash_Kaviya
(1) Now the person in question did not had turnover above 20 Lakh till 31-DEC-2021, but by 10-Jan-2022, he realized that his turnover is about to exceed GST threshold. So now if he applies for GST in JAN-2022, so how many GST returns he has to file?
(2) Will he also need to file GST returns for past months (from APR-2021 till DEC-2021)?

@ashish_shah, no he needs to start with the month of January. Once his turnover exceeds 20 lakhs, within 30 days he shall obtain GST registration.

@Yash_Kaviya Does your Q&A team have any GST experts (CA’s and registered GST practitioners), who can confirm that our interpretation of GST law is correct?

@ashish_shah, yes we do have tax experts on GST, Income Tax and certified Chartered Accountants in our team who work very closely with us. Your question has been reviewed by CAs before being answered.

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@Yash_Kaviya
Pursuant to our discussion above.
Will the person need FIRC certificates while filing GST returns? or are they not required?

Hi @ashish_shah, realization of consideration is pre condition for export of service and hence FIRC would be required for the same.

@Yash_Kaviya
what happens in the cases where freelancer takes payment directly from his foreign client through platforms like https://wise.com in his savings bank account? and does not generate FIRC?

@ashish_shah, you can check out this link.

@Yash_Kaviya
My question was, “what happens in the cases where freelancer takes payment directly from his foreign client (through any online forex platforms) into his savings bank account? and does not generate FIRC?”
What happens to such income?
The question is not answered in that link.

Hi @Jayendra_Danidhariya, could you help out here.

Hey @ashish_shah

FIRC is confirmation that payments have been realized for services provided, which may be demanded by GST officials in case of scrutiny. The link sent yesterday was about how to generate FIRC from wise platform.

Further under GST, it is not emphasized over type of account used like under Income tax.

If this doesn’t clarify answer for you, please elaborate your question so that we can guide you further.

@Jayendra_Danidhariya @Yash_Kaviya

(1) So prima facie, FIRC is not required. Only if GST officials ask, then only it is required, right?
(2) There is another scenario, where person is taking payment using https://www.veem.com/. Now I checked with their support team and they said, they don’t provide FIRC, but their transaction receipts can be used as FIRC copies. So, will such receipts satisfy the “Export criteria” of GST ?

Hey @ashish_shah

(1) Yes, if GST officials require that, then only it is required.
(2) Alternatively, you can request BRC(Bank realization certificate) as a proof.