GST has become the talk of the town since the news of its applicability. The new tax will be levied across different sectors and will be replacing multiple taxes, We discussed the GST Full form and its effects on the economy few months ago. Several myths related to the new taxation scheme were clarified. However, now that the implementation date is pretty close, there are several anticipations among business owners & freelancers in the country. Earlier, service providers used to charge 12.36% which was changed to 14% and eventually to 15% which is the present tax rate. However, now the GST for service providers will change to 18%.
GST for service providers, freelancers etc.
Furthermore, there are several provisions like GST exemption for businesses with a turnover with less than INR 20 lakhs in the preceding financial year. The freelancers, bloggers & internet marketers who were not incorporated under law, and were practicing their small business through their personal accounts, are now confused about what will be the GST rules for them. Thus, to solve these queries, we asked some questions from CA Karan Batra who has his Chartered Accountancy practice in New Delhi and runs charteredclub.com. Keep reading below to know more about GST for Service providers, freelancers, bloggers etc:
1. What is the GST applicability for online businesses like writing services, tech services, blogging etc?
CA Karan Batra: Currently, Service Tax is applicable on these services @ 15% and from 1st July 2017 – GST would be applicable on all these services @ 18%. Essentially, they have to collect 18% of the base receivable amount over and above the base amount from the client/customer and then submit this 18% to the government. The service providers do not have to pay the GST from pocket/out of income. It is similar to the case of earlier Service tax.
2. Will the bloggers/freelancers who receive payments from abroad be required to charge GST from their clients?
CA Karan Batra: No, GST is not levied on Export of Services outside India.
No, GST is not levied on Export of Services outside India.
CA Karan Batra, charteredclub.com
3. A lot of confusion is existing around payments from google adsense/International affiliate commissions. Please throw some light on taxation process on these.
CA Karan Batra: As mentioned above – GST would not be levied on Export of Services but would be levied @ 18% on services provided in India.
In the above mentioned transactions, we have to ascertain whether it is considered as Export of Services or not. The govt has laid down several conditions which help in determining whether a service is provided in India or outside India. Thus, the facts of the matter would be required to be checked in each case and it is extremely difficult to give a generic answer.
4. Are freelancers (non-incorporated one person businesses) also required to file 3 GST returns per month?
CA Karan Batra: If you have not registered for GST – you are not required to file any GST Return.
However, if somebody has registered for GST – then 3 returns per month are required to be filed. Including, 1 annual return is required to be filed. All of which makes it 37 returns in total for each year.
37 returns sounds like a big number but frankly speaking – most of these returns would be auto-populated. GST is a technology enabled Tax and a lot of the compliance work would be taken care of by technology.
5. What are the exemptions/relaxations for small businesses/freelancers under the new GST rule?
Small businesses are not required to register for GST if their annual turnover is less than Rs. 20 Lakhs. This limit of Rs. 20 Lakhs is for all states except several north eastern and hill states. For north eastern and hill states, this limit is Rs. 10 Lakhs.
Here were some questions that we asked from CA Karan Batra. While the taxation process is going to remain somewhat similar to what it was before for service providers, taxation on income sources like Google Adsense or affiliate marketing is still unclear. Among the several GST pros and cons, one good thing happened. The small business tax exemption limit has gone up. It is from INR 10 lakhs to INR 20 lakhs per year.
We will keep updating more information about GST for service providers and internet marketers. With time, more clarity will be achieved. If you are a CA/Lawyer and have information about GST for service providers to share, please feel free to send us an email to firstname.lastname@example.org.