Who Needs to Register for GST
GST registration is mandatory if your annual turnover exceeds ₹20 lakhs (₹40 lakhs for goods only, ₹10 lakhs for special category states). Even below threshold, voluntary registration makes sense if your clients are GST-registered (they want input credit) or if you sell across states (mandatory regardless of turnover). Once registered, you must file returns even with zero revenue — non-filing leads to penalties of ₹500/day. Plan for GST compliance costs (₹500-2000/month for CA services) when calculating profitability.
The GST Slabs Explained
India has five GST slabs: 0% (essentials like fresh food), 5% (processed food, basic services, transport), 12% (computers, processed food, business class travel), 18% (most services, electronics, financial services), 28% (luxury items, automobiles, gambling). Most freelance services fall under 18%. Always charge GST on top of your fee — never absorb it. If you quote ₹50,000 to a client, charge ₹50,000 + 18% GST = ₹59,000. Many freelancers mistakenly absorb GST and reduce their net income.
Input Tax Credit: The Hidden Profit
GST you pay on business expenses (laptop, software, internet, office rent, business travel, professional services) can be claimed back as Input Tax Credit. This often reduces your effective GST liability by 30-50%. Common GST-eligible expenses for freelancers/small businesses: laptop and accessories (₹18% recoverable), software subscriptions (Adobe, Microsoft, Zoom — 18%), internet bills (18%), office rent if commercial (18%), business travel airfare (12%), printing and stationery (18%). Maintain GST invoices for everything — most freelancers lose ₹50,000+ annually by not claiming ITC.
Composition Scheme: Simplified GST
Small businesses with turnover below ₹1.5 crores can opt for the Composition Scheme. Pay flat 1-6% of turnover (depending on business type) instead of standard GST. Cannot collect GST from customers, cannot claim Input Tax Credit, cannot do interstate sales. Best for: small retail businesses, restaurants, small manufacturers with mostly local sales. Worst for: B2B service providers (no client wants a non-ITC vendor) and businesses with high input costs (no ITC means real loss). Calculate carefully before opting in — the simplified compliance comes at a real cost.