Active Member
Anant L Member Since: May 6, 2015

Hi Juvy and others, I have sort clarifications from the GST Department regarding GST's impact on freelancers, specifically freelancing via UpWork, so thought sharing with all.

 

If any service provider is providing any service to any non indian person/company via any means will have to compulsorily get registered for GST.

 

The threshold limit of INR 20Lacs, is for  "INTRA-STATE" sales only, where as the freelancers on upwork are doing "INTER-STATE" sales having no threshold. So, a person makeing a sale of $ 1 (One USD) as well has to register for GST under the current provisions of the IGST Act, 2016.

 

So as per this, each and every freelancers earning via upwork has to get themselves registered within 30days of first export transaction via upwork. Which might be an issue for many.

 

Moreover, earlier under the Service Tax, freelancers claimed it under Export Sales and didnt paid any taxes on the same turnover. But under it's compulsory to pay IGST @ 18% on export of services turnover and then claim refund via GST RFD -11  form after 7 days of payment or till 1 year of the same. 90% of the refund amount will be refunded within 2 weeks and rest within 2 years after scrutiny by officers.

 

BUT, to the exporter's saviour, exporters need not pay IGST of 18% on export turnover if --

 

Exporter submit a Letter of Undertaking (if turnover greater than INR 1 Crore) or a "Running Bond" of the approximate taxable amounts along with GST RFD -11 to the appropriate officers. FYI - existing offenders, and some exporters may require to provide Bank Gurantee of max. 15% of the Taxable amount.

 

To simply let's take an example. - 

 

Freelancer's Name = Mukesh
Supplying Service from =  Delhi, India
Contractor's or Service Recipeint's Name = Matt
Service Provided at = Houston, Tx (always place of recepient for all services apart from OIDAR, and few)
Service Provided = Web Development
Contract Amount = $100/-
INR/USD = INR 65 
Contract Completed on = 1st July, 2017



So, as per the above information, mukesh has to get compulsorily registered under GST within 30days from 1st July. Now the tax part -

A. Case 1 (When Refund mechanism is used)
Tax Liability (IGST) => INR 18% x $100 x 65 = INR 1,170/-
Payment Due Date = 20th August
Refund can be claimed from 27th onwards till one year from 20th August


B. Case 2 (Where Running bond is submitted) -- [ this option should be opted by all]
No payment of taxes required. GST registration, Bond and return filing mandatory.

Here bond is to be given on a non judicial stamp paper, as per a simple format provided by the governement.
Running Bond Amount = Total IGST liability for the year 

There are some provisions in regards to Invoice Formats, details of the export of services to be kept, number of returns, etc, there are some specific restrictions on OIDAR services (like web hosting etc,) and other categories. Please contact your nearest GST Consultant for exact clarifications.

I hope it was simple to understand. Send in your queries.

 

Regards,

Anant