One major advantage of the GST or the goods and services tax is that it is expected to increase the base of the tax payers. This helps in bringing down to overall tax rate paid by the existing tax payers and also helps to increase the tax and GDP ratio of the country. GST news seems to suggest that after the roll out of GST post July 1’ 2017, the freelancers will also get impacted along with many other traders and businessmen.
Currently there are many freelancers who do not pay taxes and duties to the government as there are no organized rules and regulations formulated for them. Some freelancers fall into the exempted tax limit while there are a few freelancers who provide taxable services to the consumers and hence they fall in the tax payable bracket. As per the news on GST, after the advent of the new unified taxation system and as laid out under the GST laws, it is a mustfor all the freelancers to get registered under the GST portal.
Impact of GST on Freelancers
Especially for the small scale freelance set up, GST is going to be favorable. This is because the tax exemption limit, as per GST news, has been raised to Rs. 20 Lacs from the current Rs. 10 Lacs. However, this doesn’t hold true for the north-eastern states because in the NEStates the exemption is still Rs 10 Lac according to the GST news. The freelancers who currently earn more than Rs 10 Lac pay a handsome amount of service tax that also includes the Swachh Bharat Cess (SBC) and KrishiKalyanCess (KKC). But now the freelancers who earn up to Rs 20 Lac are not required to register for GST and will hence be able to save a magnanimous tax amount. This is a big motivation for the small-scale freelancers.
The GST news states that freelancers will be able to get the input tax credit under the new GST laws, which was not the case in the existing tax scenario. In the current tax system, the freelancers bear the cost of the VAT, CST, and excise duty on the inputs which leads to the increased cost of services offered by them. But now, the input credit will be available to them.
Also, the freelancers will be able to gain the input credit on stock in the case of shifting or relocation from the tax exemption category to the taxable category. The freelancers who are providing software services either online or offline, currently pay both the ST and VAT. Since they pay double tax on the same service of the sale of the software, it causes a cascading effect which therefore raises the cost of the software. But after the implementation of GST, this problem of cascading effect will get eliminated and the cost of software will be reduced. This is good news for the consumer as well since it will benefit the end customers more than it helps the freelancer.
But the picture is not all rosy for the freelancers. The GST news also mentions that while the current service tax the freelancers are paying is 15%, after GST it will most likely be increased to 18%. This will increase the cost of service which will impact the consumer ultimately. Also, under the GST regime, the freelancers are expected to register from their own location of a respective state and pay CGST or SGST accordingly to the state since there is no central registration. Also, as the legal news says, they will have to file multiple tax returns from their registered location raising the legal compliance burden. To add more, even a free service by the freelancer is taxable under the GST.
Looking at the larger picture, the freelancers can be hopeful for better laws and business for them. Things are still unclear and they must keep their fingers crossed until the final is revealed.
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