(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.
I recently had a call with my bank (HDFC), as they are updating their system, they enquired more about the exact services we offer. During the conversation, they also enquired if we could produce any work relation document between Upwork and us. Similar to Certificate of Earnings.
As we are an agency, we do not have the option to download certification of earnings.
While searching the Upwork community, I came across this thread https://community.upwork.com/t5/Freelancers/India-GST/td-p/361564/page/15. And there it has mentioned that Upwork will assist by providing signing the confirmation of services document.
I had a chat with the Upwork customer care regarding this, but they said that they do not provide any such document and the confirmation of services document is only provided for EU nations.
I would like to if any freelancer or agency has come across this issue. Are they any supportive documents that can be provided by Upwork would prove that we provide our service in Upwork.
Thanks for the timely response and I really appreciate it. I have received necessary information via support ticket and I will follow up with the agent