GST Hacks for Startups & Freelancers

Eligibility for GST Registration
Swarit Advisors
| Updated: Aug 29, 2017 | Category: GST

It is beneficial to GST Online Registration if you are a service provider or a freelancer as there is an increase in the threshold limit under GST which will enable them to carry on the business smoothly. In this article, we will discuss GST for Freelancers and new Startups?

GST has four different slab rates of 5%, 12%, 18% and 28%. Initially, it may appear the t burden of tax has been increased on the service provider (as previously the rate of service tax under the Service Tax laws was 15%)

However, the GST regime allows the service provider the benefit to claim the input tax credit on the goods and services both (as previously the service provider was allowed to take input tax credit only the services and not on the goods) this will lead to decrease in the cost of service

GST for Start-ups

Due to the introduction of GST, the startups have a great opportunity to develop their business due to the increase in the threshold limit to Rs. 20 lakhs except those who are dealing with e-commerce sector ( as they have to mandatorily take GST Registration Online in India.

GST for Freelancers

GST will help the small freelancers to enrich their business as threshold limit has now been increased to Rs. 20 lakhs (except for northeastern states) as during the Service tax regime the free lancers were compulsorily required to take registration if their average earning is greater than Rs. 15 lakhs.

  • Service providers providing freelancing services in the form of interstate or his turnover is above Rs. 20 lakhs are required to take registration for each state separately.
  • Service providers can now claim the taxes paid by them on goods and services to settle their final tax liability.

Tax Liability for Freelancers under GST

Freelancers whose turnover is above Rs. 20 lakhs are required to take GST registration for each state separately.

Comparison under Service tax and GST

Under Service tax  
1)    ABC Ltd. provides services to X for an amount of Rs 50, 00,000.

 

 

2)    ABC Ltd. Has also paid tax on the goods purchased of Rs. 5,00,000 for providing the services (Input Tax credit Rs. 75000)

  •  ABC Ltd. Service tax liability comes to Rs.750000 including SBC and KKC @ 0.5%
  • Input tax credit of Rs. 72500 (75000 – 0.5% of Rs.500000) will be allowed
  • SBC is not allowed as a credit
  • Thus the final tax liability comes to Rs. 677500
Under GST 
1)    ABC Ltd. provides services to X for an amount of Rs 50, 00,000.

 

 

2)    ABC Ltd. Has also paid tax on the goods purchased of Rs. 5,00,000 for providing the services (Input Tax credit Rs. 75000)

  • ABC Ltd. GST liability comes to Rs. 900000
  • Input tax credit comes that can be claimed comes to Rs. 90000.
  • The final tax liability comes to Rs. 810000

Thus from the above comparison, the final tax liability under Good & Service Tax has increased to Rs. 132500. Also, the service provider will get the benefit of input tax credit paid on the inputs which were not allowed under the old service tax regime.

Thus it will make the service industry more regulated and organized. Besides the freelancers operating on a small scale under GST and benefited through an increase in the threshold limit

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Swarit Advisors

Swaritadvisors.com is technology motivated platform establishing the specialized legal & Financial advisory services in India. We are dedicated to helping startups and MNC in solving legal, Taxation and compliance related to starting and running their business around the world.

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