GST: Freelancers exporting software to take a hit

Vijay C Roy

Tribune News Service

Chandigarh, August 4

The GST Act, mandating every person engaged in exporting services to comply with the GST law, is likely to hit individuals and freelancers, especially software professionals, across the country. Under the GST law, if any person is supplying any goods or services outside the country, then GST registration becomes mandatory.

For example, if a freelancer is earning even a single rupee from outside the state, then he is liable for GST registration in India and also shall not be liable to claim the basic exemption limit of Rs 20 lakh. The freelancers who are exporting services outside India will not only have to register with GST but also has to file three returns every month. Prior to GST implementation, there were no such regulations.

Industry lamented that this ambiguity may lead to restricting exports of services to significant level from the present levels. There appears to be serious dichotomy between intention and wordings of GST as far as export of services is concerned. They rue that the increase in indirect taxation will inflate the cost of the service.

“The move by the Centre will increase overhead expenses as well as administrative work. We are freelancers with a team of two and it will be very difficult to comply with new norms with limited earnings,” said Manmeet Sirohi (name changed), a Mohali-based freelancer who works for different companies based in the US, the UK and European countries.

Echoing similar sentiments, Anuj Aggarwal, managing director, Altruist Technologies (P) Ltd., said, “There are millions of freelancers in India who export software to different countries. This will incur increase in overhead expenses as they have to hire accountant also and their working capital will be blocked as first they have to pay tax and later on it will be refunded. My suggestion is there should be some threshold limit for registration.”

According to Mastan Singh Chambyal, a CA,  and vice-chairman, Chandigarh branch of Institute of Chartered Accountants of India (ICAI), as per the GST Act, every person exporting goods or services will have to comply with the GST law and they will levied a tax called IGST Tax. “There is no minimum exemption limit. Even the freelancers are also covered and have to get themselves registered. Under the GST, exports have been categorised as zero-rated supply and under the new regime, taxes paid on input as well as output supplies are refundable,” he added. 

New norms 

• Under the GST law, if any person is supplying any goods or services outside the country, then GST registration becomes mandatory
• If a freelancer is earning even a single rupee from outside the state, then he is liable for GST registration in India and also shall not be liable to claim the basic exemption limit of Rs 20 lakh
• The freelancers who are exporting services outside India will not only have to register with GST but also has to file three returns every month