GST Registration for Freelancers: Do You Need It for Exports Below ₹20 Lakhs?
For India’s growing community of freelancers, developers, designers, writers, and consultants serving global clients, GST compliance remains a significant concern. The core confusion arises from a legal conflict. While the GST law generally exempts small businesses with a turnover below ₹20 Lakhs, it also mandates strict registration for those making “inter-state supplies.” Since exports are technically classified as inter-state supplies under Section 7(5) of the IGST Act, 2017, many freelancers feel trapped in a compliance paradox.
This comprehensive guide provides a definitive legal analysis. We break down the interaction between Section 24 of the CGST Act and Notification No. 10/2017-Integrated Tax to give you a clear answer: While GST registration is not mandatory for service exporters with an annual turnover below ₹20 Lakhs, opting to remain unregistered carries significant operational risks. These often include difficulties with banking compliance and the potential complication of “Reverse Charge” mechanisms. Therefore, voluntary registration is frequently the more practical and commercially sound decision.
A Note on Conflicting Professional Opinions: It is important to acknowledge that some tax practitioners hold that the export of services mandatorily requires GST registration, regardless of turnover, citing Section 24(i). However, this guide follows the position supported by CBIC clarifications and Notification 10/2017, which explicitly exempts service exporters below the threshold from compulsory registration. The legal position presented here aligns with authoritative government sources and mainstream interpretation.
The Legal Framework: Section 24 vs. The Exemption Notification
To understand your registration liability, we must examine how specific sections of the GST law interact with each other.
| No | Legal Provision | Key Implications for Freelancers |
|---|---|---|
| 1 | Section 22, CGST Act | Exempts service providers with aggregate turnover below ₹20 Lakhs (₹10 Lakhs in Special Category States) from registration |
| 2 | Section 24(i), CGST Act | Mandates registration for anyone making “inter-state taxable supply” regardless of turnover, and exports are classified as inter-state supply |
| 3 | Section 7(5), IGST Act | Defines exports as “inter-state supply”—creating an apparent mandatory registration requirement |
| 4 | Notification 10/2017-Integrated Tax | EXEMPTS service providers making inter-state supplies from Section 24’s mandatory registration if turnover is below ₹20 Lakhs |
The “Shield” Notification Explained
As per Notification No. 10/2017-Integrated Tax (G.S.R. 1260(E)), issued under Section 20 of the IGST Act read with Section 23(2) of the CGST Act, the Central Government exempted persons making inter-state supplies of taxable services from registration, provided their aggregate turnover (computed on all-India basis) does not exceed ₹20 Lakhs for most states, or ₹10 Lakhs for Special Category States as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution.
What This Means for You: If you are a freelancer providing services (not goods) and your total turnover is below the threshold, this Notification legally shields you from the mandatory registration requirement under Section 24(i). You are legally permitted to operate without a GSTIN (GST Registration).
Legal Hierarchy: Notification vs. Social Media FAQs
Many freelancers have encountered confusing “Twitter FAQs” issued by official tax handles in December 2017, which suggested that exporters must register regardless of turnover. This tweet created widespread confusion because it appeared to contradict the Exemption Notification.
It is crucial to understand the hierarchy of Indian law in this context. As established by the Supreme Court in Commissioner of Central Excise vs. Ratan Melting & Wire Industries [2008 (231) E.L.T. 22 (S.C.)], statutory notifications issued under Acts always prevail over administrative clarifications, circulars, or informal communications. The Court held that “a circular which is contrary to the statutory provisions has really no existence in law.”
Key Takeaway: While FAQs and tweets may reflect the department’s interpretation of the law, they cannot override an exemption properly granted by a Gazette Notification. The legal exemption under Notification No. 10/2017-Integrated Tax remains valid and superior in effect. You can confidently rely on the Notification over informal clarifications.
Hidden Risks of Remaining Unregistered ⚠️
While the law permits you to skip registration, the practical business and banking ecosystem often creates challenges for unregistered exporters. Here are the key risks you must consider before deciding to remain unregistered.
The “Reverse Charge” Trap Under Section 24(iii)
Even if you are exempt as a supplier of export services, you might become liable to register as a recipient of imported services. Section 24(iii) of the CGST Act mandates registration for anyone liable to pay tax under the Reverse Charge Mechanism (RCM).
The Scenario: If you purchase software subscriptions from abroad—such as Zoom, Google Workspace, Canva Pro, Adobe Creative Cloud, or GoDaddy domain services—for business purposes, this is treated as an “Import of Service” under Section 2(11) of the IGST Act. Under the relevant RCM notifications issued under Sections 5(3) and 5(4) of the IGST Act, you (the importer) become liable to pay IGST at 18% on this purchase.
Critical Point: Since Notification 10/2017 only exempts suppliers of interstate services from registration, importing foreign software for business use triggers mandatory registration under Section 24(iii) as you become a recipient liable under RCM. It is worth noting that enforcement in micro-cases involving small subscription amounts has been limited in practice, but the black-letter legal position remains as stated.
Exception for Personal Use: If you use certain online services purely for personal, non-business purposes (such as personal Netflix or Spotify subscriptions), you may fall under the category of “non-taxable online recipient” for OIDAR (Online Information and Database Access or Retrieval) services, where the foreign supplier bears the GST compliance obligation through their simplified registration in India. However, any software used for your freelance business would not qualify for this exception. Note that OIDAR service providers supplying to non-taxable online recipients in India are themselves required to obtain GST registration regardless of the turnover threshold.
The Financial Case for Voluntary Registration
Beyond risk mitigation, there is a compelling financial case for voluntary registration. Exports are classified as “Zero-Rated Supplies” under Section 16 of the IGST Act, 2017. This means exports are not just tax-free—they allow you to claim a refund of the input taxes you paid on your business expenses.
Registered vs. Unregistered: A Financial Comparison
| No | Aspect | Unregistered Freelancer | Registered Freelancer |
|---|---|---|---|
| 1 | GST on Business Expenses | 18% GST is a “sunk cost”—cannot be recovered | 18% GST can be claimed as a refund of unutilised ITC |
| 2 | LUT Filing for Exports | Not available—cannot file Form GST RFD-11 | Can file LUT under Rule 96A and export without paying IGST |
| 3 | Banking Documentation | May face additional queries from banks | Streamlined processing with GSTIN on record |
| 4 | RCM on Imported Software | Potential compliance risk | Compliant + can claim ITC on RCM paid |
| Annual Benefit (₹2L expenses) | ₹0 refund | ~₹36,000 refund of unutilised ITC* |
Note: The actual refund amount may be subject to limitations under Notification No. 16/2020-Central Tax (dated 23 March 2020), which amended Rule 89(4) to introduce certain caps on refunds of unutilised ITC. Please consult a tax professional for calculations specific to your situation.
The Input Tax Credit (ITC) Benefit: As a freelancer, you incur business costs on laptops, office rent, broadband, co-working spaces, and software subscriptions. You pay 18% GST on these items. If registered, you can avail this ITC in your electronic credit ledger and subsequently claim a refund of unutilised ITC under Rule 89 of the CGST Rules (via Form GST RFD-01) because your output service (export) is zero-rated.
Conclusion
The legal position is clear: You are NOT legally required to register for GST if your export turnover is below ₹20 Lakhs, thanks to Notification No. 10/2017-Integrated Tax. You will not be penalised solely for non-registration if you stay within this limit.
However, the “safest” and most profitable route is Voluntary Registration under Section 25(3) of the CGST Act. By registering, you ensure full compliance with RCM obligations on software imports, simplify your banking documentation for foreign remittances, file LUT under Rule 96A for seamless exports, and unlock the ability to claim refunds of unutilised ITC on your business expenses.
FAQ’s
Note: Some platforms may route payments through Indian intermediaries or local entities, which can make the place-of-supply and recipient characterisation more nuanced. In such cases, the practical treatment may differ, and you should verify the payment flow structure with your specific platform.
For 100% compliance, you should register and pay IGST on such imports. The good news: if registered, you can claim this amount back as ITC. While enforcement on very small subscription amounts has been limited in practice, the legal position remains that RCM liability triggers compulsory registration.
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