GST

GST for Freelancers: How to Reduce your Expenses?

The Goods and Services Tax in India has been in the news for quite some time and is being implemented from 1st July 2017. It is expected to change the tax system of the country and contribute to the growth of the economy. There have been many industries that approve of the GST tax; whereas there are many that oppose the tax as it would affect them negatively.

GST is an indirect tax, which is comprehensive in nature and is applied to many goods and services to centralize the tax of the state and central governments. It would streamline all the taxes into one single channel and would make it easier for the consumer to pay the tax on the goods and services. Many sectors will be affected once the GST is implemented and it would take time for the businesses to settle down with their taxes after learning the new system and understanding the implications of it towards their particular business.

Start-ups and the freelancing industry are also going to be affected by the GST. The GST is said to be divided into four slabs which are 5%, 12%, 18%, and 28%. Every industry would fall in one of these slabs depending on the nature, size, reach, and many more aspects of the business that they are carrying. The new GST regime^[1] would allow service start-ups to claim a credit of tax paid on goods and services used as an input in their business. The consumers can expect the cost of services to come down due to this provision as the claim would allow breathing room for service providers to their businesses. The limit for registration of service start-ups has been increased under the new GST laws from 9 lakhs to 20 lakhs which would attract more people to start new ventures as it has become easier under the new GST regime. They do not have to spend on registration right away and can use that amount of money for expanding their business. E-Commerce service providers would have to compulsorily register their business regardless of the turnover of their company.

Who are Freelancers?

They are persons who work on multiple engagements and they aren’t employed by anyone. Their works is on contract basis and receive a fee for the same. As they are service provider, the rules related to service provider shall be applicable to them.

Benefits for Freelancers under GST

The freelance industry will also flourish as it would gain a lot of benefits under the new GST laws, such as follows:

• Registration Limit

Freelance businesses would not need to be registered GST if their turnover is less than 20 lakhs, which would allow small-scale start-ups to flourish as they can use the same money to expand their business in the early stages. This, however, does not apply if the business is an online based business, as it will have to register right away.

• Inter-State Registration

Under the new GST laws, the services providers or the freelancers would not have to register under GST each state that they want to do business in and can save money and time regarding different registrations, which were compulsory in the current tax system.

• Claim Credit on Input Tax Paid

The start-ups and freelancers would be able to claim the input amount of tax paid to set off outgoing taxes paid. This will help them in raising more capital and expand their business smoothly.

• Streamlining of Tax

The freelancers would not have to keep a track of different tax that they need to pay as all the taxes would be under one GST heading and will make it easier for them to understand, follow, and pay the tax on time.

• Benefit for Service Start-ups

The service start-ups who outsource their delivery system will benefit from the input tax under the new GST laws.

• Organized

The new GST laws will make the service start-up sector more organized and regulated. This will help in the growth of the retail sector and the economy as a whole.

• Centralized Tax Payments

The GST has streamlined the tax payment into one single payment, and the payment can be made online easily, which would help to eliminate the middleman. The start-ups and freelancers who are required to pay taxes can pay it online and not rely on tax officers to help them make their payments.

• Promote Small-scale Business

GST will help to promote small-scale businesses as they will not have to bear registration costs and can also claim the input tax. This will bring new products and services in the society and help boost the economy of the country.

• Clear tax brackets

GST has kept the taxation to a simple program with only four tax brackets so the companies can easily identify the bracket that they would fall under and plan their budgets accordingly.

Future of Freelance

There are many positive changes that the GST laws will bring about in the freelance and the service start-up industries and they can use many hacks to prevent themselves from paying taxes right away. The registration and taxation limit is a huge advantage for growing companies as they can have more in-flow of capital to regulate and expand their businesses and offer better quality products to the final consumer. The Input Tax Credit is also a win-win for start-ups as they can claim the tax and offset their taxation in order to keep the capital flowing in the business smoothly.

The new GST laws will not only promote more people joining in the start-up sector but will also give an opening channel to freelancers who were afraid to try to enter into business ventures because of raised costs and taxes. Now, with the new GST laws, businesses with smaller capitals can flourish more as they do not have to register themselves under the GST regime and can also expand their business due to the open channels of supply chain between states. This would also make newer products available in different states and flourish the markets of goods and services. The service start-ups will also be able to provide better quality services since they would not have to pay heavy taxes in the initial turnover of their business.

Conclusion

GST is a concept that is to be properly understood. Many are still wondering about the new changes. If you have any query related to GST registration etc. then contact Enterslice.

Read our article:GST Impact: How Enforcing Input Tax Credit Can Hurt the SME Economy