GST For Freelancers & Small Business Owners: 10 Crucial Questions Answered!

GST Council has provided their green signal to the GST roll-out on July 1st. This means that every state has confirmed their readiness and agreement in the pan-India rollout of Goods and Services Tax regime, which will implement one country, one tax rule.

Kerala finance minister Thomas Isaac said, “We were discussing the rules and (they) have been completed. Transition rules have been cleared and everybody has agreed for 1 July roll out,”

Last month, the GST Council categorised 1200 products under the tax brackets of 5, 12, 18 and 28%, and things are now finalised.

But, are freelancers and self-employed professionals ready for the GST implementation? How will they pay their taxes?

We attempt to provide some of the answers, in the following series of questions and their answers:

1. What is the minimum annual revenue for registering under GST?

Answer: Rs 20 lakh is the threshold annual revenue, beyond which every business or service provider needs to be registered under GST. For businesses operating in North Eastern states, this limit is Rs 10 lakh.

2. Do I need to register under GST? My online business is very small…

Answer: Yes, you will be required to register under GST, even if your business’ annual revenue is less than Rs 20 lakh, which is the threshold for businesses which are required to be registered under GST. Under Section 19 r/w Schedule-III of the Model GST Laws, every form of online business needs to be registered under GST, irrespective of the amount of revenues generated.

3. What Exactly Is An Ecommerce Business, as per GST?

Answer: Section 43B(d) of the MGL (Model GST Law) describes e-commerce business as “Electronic Commerce to mean the supply or receipt of goods and/ or services, or transmitting of funds or data, over an electronic network, primarily the internet, by using any of the applications that rely on the internet, like but not limited to e-mail, instant messaging, shopping carts, web services, Universal Description Discovery and Integration (UDDI), File Transfer Protocol (FTP) and Electronic Data Interchange (EDI) whether or not the payment is conducted online and whether or not the ultimate delivery of the goods and/or services is done by the operator.”

4. What will happen if my business avails exemption, and doesn’t get registered under GST?

Answer: You will lose business, as simple as that. Here is why: Your must be working with various vendors, suppliers and customers, and most probably, they are registered under GST. Hence, if they are working with you, but if you are not paying taxes as per GST, then they will have to suffer, and pay additional taxes, on your behalf. This doesn’t work for a long time. Hence, if you are a freelancer and a self-employed personal, and even if your annual revenues is less than Rs 20 lakh, get yourself registered.

5. What if I am a stubborn businessman, and not registering under GST?

Answer: Your business will suffer. Under current tax laws, if you are not registering under say Sales Tax, then the IT Dept. can prosecute against you, and at the max, you are required to pay the required fine. But, under GST, Govt. will rate your business, which will be shown to the buyers and sellers of your business. Under Compliance Rating Score (CRS) under GST, Govt. will rate your business as per your GST tax paying habits, and accordingly, your business can suffer. Hence, no GST means, no business for you.

6. How can I register my small business with GST?

Answer: Pretty simple, actually. All you need to do is visit gst.gov.in, and start the process. Alternatively, there are several firms which provide professional services for registering your business with GST and subsequently file the returns as well. A simple Google search will help you with that.

7. How many returns will be required to file under GST?

Answer: For any business, there will be a total of 37 returns to be filed every year, which is 3 per month and one annual return. Note here, that this covers only one state. Hence, if your business is operating in three states, then the total number of returns filed shall be 111, and so on. And, everything has to be online, and digital. No paper ledger books and account books.

8. I have heard about presumptive tax? Will it work for my small business?

Answer: If a business’ annual revenue is less than Rs 50 lakh, then presumptive tax can be opted, under composition scheme. Under this, you will be required to pay only 0.5-2.5% ‘assumed’ tax for the goods and services sold. However, this is not open for all. Only manufacturing units and some services like restaurants can opt for this presumptive tax option.

9. Ok, I am eligible for presumptive tax. What are the drawbacks?

Answer: First of all, this shall only work in one state. If your business is operating in more than one state, then this exemption won’t work. Besides, the presumptive tax will stop you from availing inputs tax credit, as you cannot charge tax from your buyers.

10. Can service providers claim GST payment based on purchases made for the business?

Answer: Yes. If you are a freelancer and purchase a new laptop meant for your business, then you can claim GST paid on it as input credit while paying his outgoing GST liability.

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Sources: 1, 2, 3