May 10, 2025, Posted by Admin
GST for Freelancers & Consultants in India: Complete Guide 2025
Background: The rise of the gig economy and remote work has led to a surge 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 operating entirely from their laptops at home.
But with this freedom comes a challenging companion: tax compliance, especially under the Goods and Services Tax (GST) regime.
Many freelancers are left wondering:
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 ₹20 lakhs?
These aren’t just compliance questions—they directly impact your profitability, client relationships, and cash flow.
This article demystifies GST for freelancers and consultants by explaining the rules around registration, invoicing, LUTs, exports, refunds, and more—complete with authentic references to the law (sections, rules, circulars, and forms). Whether you're billing in rupees or receiving foreign currency, here’s everything you need to know to stay compliant—and get your due benefits.
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 ₹20 lakhs (₹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 interstate 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:
i) .The supplier is located in India,
ii) The recipient is located outside India,
iii) The place of supply is outside India (as per Section 13),
iv) The payment is received in convertible foreign exchange or INR as permitted by the RBI, and
v) 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 a refund of unutilized ITC.
- Export with IGST payment and claim a refund of the 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 the 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 ₹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 the CGST Act—such as personal expenses, food & beverages, or capital goods used for exempt services—are not eligible for ITC. Proper tax invoices and payments to vendors are prerequisites for availing ITC.
9. Voluntary Registration: Should You Opt for It?
Freelancers earning less than ₹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 the 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 ₹12 lakhs per year from Indian clients. Do I need GST registration?
A: Yes, GST registration becomes mandatory if your turnover exceeds ₹20 lakhs (₹10 lakhs in special category states) under Section 22 of the CGST Act, 2017. However, you may voluntarily register even below this threshold to claim Input Tax Credit (ITC) or if clients insist on a GST invoice.
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 payment is in convertible foreign currency, your supply is zero-rated under Section 16. You can export:
- Without paying GST using LUT (Form RFD-11) and claim ITC refund, or
- With IGST payment, then claim refund of IGST paid.
Q3: What documents are needed to prove export of services?
A: You’ll need:
- GST invoice (mentioning “export under LUT” or “export with IGST paid”)
- FIRC or Bank Realization Certificate
- LUT acknowledgment (if applicable)
- Export invoice statement + bank statement
Q4: Can I claim GST refund if I export services under LUT?
A: Yes. Under Rule 89 of the CGST Rules, you can file Form GST RFD-01 within 2 years to claim refund of unutilized ITC. Refer to Circular No. 125/44/2019-GST for documentation and process.
Q5: Is GST registration mandatory if I provide services to clients in another Indian state?
A: No, as per Notification No. 10/2017 – IGST (Rate), inter-state service providers with turnover below ₹20 lakhs can remain unregistered. But if you voluntarily register, you must comply fully.
Q6: Can freelancers claim ITC on software, laptops, and coworking spaces?
A: Yes, provided they’re used for business and you have a valid GST invoice. You cannot claim ITC on blocked credits under Section 17(5) (e.g., personal use, food, or entertainment).
Q7: What are the key GST returns I need to file as a freelancer?
- GSTR-1: Outward supplies (monthly or quarterly)
- GSTR-3B: Summary of tax liability
- GSTR-9: Annual return (mandatory if turnover exceeds ₹2 crores)
Even if no taxable supplies, you must file nil returns to remain compliant.
Q8: What if I forget to file GSTR-1 or GSTR-3B on time?
A: You’ll face late fees under Section 47 of CGST Act:
- ₹50/day (₹20/day for nil returns), up to ₹5,000
- Interest @ 18% per annum under Section 50 for delayed payments
Q9: My foreign client paid in INR via PayPal. Is this export of service?
A: No. One of the key conditions under Section 2(6) is that payment must be in foreign currency. If received in INR, it may be treated as domestic supply and GST becomes applicable.
Q10: Can I raise an invoice in USD? How do I convert for GST?
A: Yes, but for GST returns, you must convert to INR using the CBIC customs exchange rate applicable on the date of supply under Rule 34 of the CGST Rules.
Q11: I use Upwork/Fiverr. Do they deduct GST or am I liable?
A: While platforms may deduct TCS or fees, you remain liable for GST on the full consideration. You can claim ITC on platform fees if GST is charged and a proper invoice is issued.
Q12: Can I opt for Composition Scheme as a freelancer?
A: Generally No. Under Section 10(2)(a), most service providers aren’t eligible. However, those with turnover up to ₹50 lakhs may opt for the special composition scheme (6% tax) under Notification No. 2/2019-CGST (Rate).
Q13: I received advance payment. When is GST payable?
A: GST is payable on receipt of advance, per Section 13(2)(a). Issue a receipt voucher immediately and later adjust it against the invoice.
Q14: Is a tax invoice mandatory for every freelance project?
A: Yes. Under Section 31 of CGST Act, registered persons must issue GST-compliant invoices, including:
- GSTIN, Invoice No., Date
- SAC code, Description
- Taxable value, GST amount
- Place of supply
- Signature
Q15: I serve only foreign clients. Do I need to renew LUT annually?
A: Yes. LUT is valid for one financial year, and must be renewed each year via Form RFD-11 on the GST portal.
Q16: My turnover is below ₹20 lakhs, but a foreign client insists on GSTIN. What should I do?
A: Though not mandatory, you can voluntarily register under Section 25(3) to raise zero-rated invoices and claim ITC/refunds via LUT.
Q17: What SAC code should I use in my invoice?
Examples include:
- 998313 – IT & software development
- 998314 – Website/app design
- 998399 – Other professional services
Refer to Notification No. 11/2017 – Central Tax (Rate) and updates for the correct SAC.
Q18: Can I issue a consolidated invoice to a foreign client?
A: Yes, but clearly mention services, period, and currency. For refunds or audit, itemized/milestone invoices are preferable.
Q19: What if my foreign client pays after 1 year of invoice date?
A: Under Rule 96A, if payment in foreign currency is not received within one year, it loses export status—you must pay GST + interest.
Q20: My bank charges GST on USD conversions. Can I claim ITC?
A: Yes, if the bank issues a GST invoice for currency conversion or SWIFT charges, you can claim ITC under Section 16.
Q21: I conduct Zoom training for foreign clients. Is it export of service?
A: Yes, provided:
- Client is outside India
- Payment is in foreign currency
- Service is delivered online
This qualifies as zero-rated export under Section 2(6) of IGST Act.
Q22: Can I use e-invoicing as a freelancer?
A: Not mandatory unless turnover exceeds ₹5 crores. But you may use GST-compliant invoicing tools voluntarily for professionalism and automation.
Q23: I work for an Indian agency with a foreign client. Is this export?
A: No. If you’re paid by an Indian entity, it’s a domestic supply and GST is applicable—regardless of their client’s location.
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