GST for freelancers/agencies in India

[kochubei_valeria]

Upwork is now collecting General Service Tax (GST) Identification Numbers for freelancers and agencies located in India. We are not currently implementing any tax collection. The GST rules in India are complex, and Upwork is currently working to determine how the GST rules apply to all Indian freelancer and agency transactions being facilitated through Upwork’s platform. At this time, we are only collecting GST ID Numbers. 

We have sent an email to freelancers and agencies located in India notifying them of this update. If you have a GST ID number, we ask you to click the link provided in the email to update your taxpayer identification information. Or you can input the information by going to your “User Settings” and then “Tax Information.” Once you input your taxpayer identification number, this system will confirm that we have received your number.  The system will also let you respond to indicate that you do not have a GST ID number if you are not registered.

If you have any questions about GST or Tax IDs, we recommend that you consult a tax advisor to determine how the law applies in your specific case.

[e58c8405]

Hi Saumya,

You shall be able to withdraw your earnings without GSTIN too (via PayPal account). However in many cases PayPal has also started to mandatorily ask for a GSTIN for foreign receipts. Initial withdrawals should not be a problem though.

However a better approach would be to get a GST number, apply for LUT and get your export of service returns filed. This way you will be compliant and expect no troubles in future. This will also establish your business as a formal entity in government records.

Happy to help further, Thanks!

[7441e52d]

Is it mandatory to levy GST when payment is received in INR (i.e LFT) from upwork

[lokeshyadav2909]

I have been filing ITR on my own from last 3 years.

Simply file ITR4 under Section 44ADA with Presumptive income. This is valid if your yearly gross payment is less than 50 lakh, which most of the freelancers have.

For example: You have earned 20 lakhs from freelancing in the whole year from April to March.

You need to pay tax only on 50% of the amount and rest is counted as your expense. No proof required.

Therefore, total tax will be on 20 lakh that will come out to be:

5% till 5 lakh (Rs12,500 tax)

20% between 5 to 10 Lakh (Rs 1Lakh tax)

30% above 10 Lakhs. (Rs 0)

Total tax payable: 1,12,500  + cess.. 

That's all. 

[ranbeerm]

Hi Shubham,

Thanks for the clarification. This is good from a freelancer point of view.

Can you clarify following:

1. If I'm a buyer and my seller is non-Indian freelancer, how is GST compliance in that case? My CA told me: 18% GST on reverse charge and then TDS 10.4%(incase pan of seller is available)/15%( if pan is not available) TDS and pay. I'm not sure.

2. What about fees Upwork (service fee) is charging? Ideally there should be GST paid by Upwork and TDS deducted by me for Upwork service fee.

Let me know if there is any clarity from GST/TDS laws perspective.

-Ranbeer

[e58c8405]

Hello Ranbeer,

I'm trying to put answers to your queries, hope you will find this helpful:

1. Reverse Charge Mechanism has yet not been made applicable completely except in the case of domestic transport industry. So no point in paying it on reverse charge basis. You can not pay GST on import of services. TDS is a grey space here as there is no clear notification for services by freelancer based outside of India. My opinion is that ,TDS would not be applicable as per the section 195 of Income Tax Act read with DTAA.

2. You don't need to deduct TDS on Upwork as they are a foreign entity and does not have a office in India. Relevant case law to back this standing is DCIT (International Taxation) Vs. Hydrosult Inc.

Please drop me a message if you want to discuss this in further details. Hope my response was helpful. Thanks!

[ranbeerm]

Thanks, this is helpful.

[marzookmajeed]

Hi Shubham,

Let me clarify one thing, i am new to the freelancing and the taxes. I have no idea about gst or returns.

How do I get started on gst?
Is it compulsory to register for gst?

[e58c8405]

Hi,

Though it is not mandatory to register right away. Upwork does not have an
Indian Entity, so freelancers are required to be self compliant. The best
approach is to register for GST and apply for a letter of undertaking
(LUT). This will ensure that you don't have to pay any GST on your
international assignments. You must ensure that you receive an FIRC from
your bank. This proves that you have actually exported your services. Hope
this helps.

[shahyash84]

I am a GST registered professional in India. I have also filed LUT for exports so that GST need not be paid on fees earned from Offshore clients on Upwork. My question is if any work is done from Indian clients on Upwork, do we need to bear GST on that e.g. if fees charged to the client is $100, do I need to consider this amount including GST and bear GST. I know this is not a taxation advisory forum but would like to know the experience of similar freelancer professionals from India

[anupshinde17]

(1) In an ideal situation the contract would stand like - you work for Upwork (export of your services), Upwork pays you and client hires Upwork.

(2) However, if Upwork is summoned into a legal situation - it will most likely deny responsibility and say it is just an intermediary and only connects you and the client. Then the contract is between you and the client. Chances that authorities legally engage with Upwork are low (but not impossible) and then you are in a weird situation and will be blamed for tax evasion. 

Based on (2), you are liable to pay GST if you and your client are Indian. But based on (2), you will have a hard time consolidating your Upwork income in INR. In that way you tend to lose upto 40-45% money in the transaction and yet not have a clear money trail in INR.

Please consult a good accountant or firm who will support you when notices are served by authorities many years later.

My two cents when dealing with such situations:
1. Try to avoid such clients because monetarily it does not make sense losing a huge percentage to do the legal/safe thing. The compliances for clients are also problematic when sums are large.

2. If you cannot avoid, pay the GST. Even if queries are raised later, at least authorities cannot blame you for tax evasion. However, with slightly larger sums, this is not a simple thing either and you and your client could be blamed for bad invoicing

For a moment, just imagine having to defend yourself 4-8 years down the line against the tax authorities and the mental harrassment it will cause you.

EDIT: Even for freelancers who are not required to be GST registered now, be aware that if you register for GST in future the GST authorities do dig out transactions from many years in the past and have a right to question your exemptions.