GST for freelancers and consultants in Mumbai and Thane: when registration becomes compulsory, export of services and the LUT

The ₹20 lakh threshold, zero-rated export of services with an LUT, the intermediary trap, and what monthly compliance looks like once you are in.

Designers, developers, consultants and content professionals working from Mumbai and Thane for clients in India and abroad ask us the same three questions: do I need GST, do I charge it to my foreign clients, and what does it cost me to stay compliant. The answers are straightforward, but the traps are specific, and two of them — interstate supply and the intermediary rule — catch people who have done everything else right.

1. When you must register

Registration is compulsory once aggregate turnover — all taxable, exempt and export supplies added together, across all your businesses under the same PAN — exceeds ₹20 lakh in a financial year (₹10 lakh in the special-category states). Below that, registration is voluntary. Supplying services to clients in other states does not by itself force registration — the exemption for interstate supply of services below the threshold has applied since 2017 — but supplying goods interstate does, from the first rupee. Two other triggers: if you supply through an e-commerce operator that is required to collect tax at source, and if you receive services from abroad on which you must pay tax under reverse charge (for example, software subscriptions or overseas contractors), registration may be needed regardless of turnover.

2. Foreign clients: zero-rated, not exempt

Services to a client outside India are an export of services and therefore zero-rated if all five conditions are met: the supplier is in India; the recipient is outside India; the place of supply is outside India; payment is received in convertible foreign exchange (or in rupees where RBI permits); and the supplier and recipient are not merely establishments of the same person. Zero-rated is not the same as exempt. You must be registered to export without tax, and you must file a Letter of Undertaking (LUT) in Form RFD-11 on the portal each financial year before the first export invoice. Without an LUT the invoice must carry 18% IGST, which you then claim back as a refund — a slow and unnecessary route. With an LUT the invoice carries no tax, and the input tax credit on your laptop, software and co-working space can be claimed as a refund through RFD-01.

3. The intermediary trap

If your role is to arrange or facilitate a supply between your foreign client and someone else — you find customers for a foreign company and earn a commission, you recruit for an overseas employer, you source Indian vendors for a foreign buyer — you may be an intermediary. The place of supply for an intermediary is the location of the supplier, which is India, so the service is not an export and attracts 18% GST even though the client is abroad and pays in dollars. The line between "I provide the service myself" and "I arrange for someone else to provide it" is decided by the contract and the invoices; get them drafted with this rule in mind.

4. Payment evidence

Keep the foreign inward remittance advice for every export receipt. Payments through PayPal, Wise or Payoneer are fine provided the platform's partner bank issues the advice and the money lands in an Indian account in rupees converted from foreign currency. Receipts in a foreign bank account that never come to India do not satisfy the export condition.

5. Once registered: the monthly routine

FilingWhoWhen
GSTR-1 (outward supplies)Monthly, or quarterly with the IFF under QRMP for turnover up to ₹5 crore11th of the following month (13th for quarterly)
GSTR-3B (summary and payment)Monthly, or quarterly under QRMP with monthly payment20th of the following month (22nd/24th for quarterly)
Invoice Management SystemAccept or reject supplier invoices before GSTR-2BBy the 14th
LUT renewalExportersBefore the first export invoice of each financial year
GSTR-9 annual returnTurnover above ₹2 crore31 December following the year

Invoices must show your GSTIN, a consecutive number, the client's details, the place of supply and the SAC code. E-invoicing applies only above ₹5 crore turnover. Returns must be filed even for nil months, and the portal now blocks returns more than three years overdue.

6. Composition for services

Service providers with turnover up to ₹50 lakh can opt for the 6% scheme under Notification 2/2019 instead of charging 18% and claiming credit — but composition dealers cannot make interstate supplies or exports, so the scheme is of use only to freelancers with purely local Indian clients.

Income tax alongside

Most freelancers with gross receipts up to ₹50 lakh (₹75 lakh with under 5% cash receipts) can declare 50% of receipts as income under section 58 (44ADA of the 1961 Act) and skip books and audit. We handle registration, the LUT, monthly returns and the income tax side together. Get in touch.

I. H. Khan and Associates
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.

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