GST on Interstate Supply of Services by Freelancers to Indian Clients — IGST Rules
Introduction
Freelancing has become a common way of providing professional services in India, whether it is digital marketing, graphic designing, consulting, software development, content writing or other professional work. However, when a freelancer provides services to a client located in another State, an important GST question arises: Should the freelancer charge CGST + SGST or IGST?
The answer mainly depends on the location of the supplier and the place of supply. For a normal interstate supply of services, IGST is generally applicable. The GST portal also determines an interstate transaction where the place of supply is different from the State of the supplier.
When is IGST applicable?
Suppose a freelancer is registered in Maharashtra and provides digital marketing services to a client located in Karnataka.
Supplier location: Maharashtra
Client location: Karnataka
Nature of supply: Interstate
Tax applicable: IGST
In an interstate transaction, CGST and SGST are not charged separately; the applicable tax is charged as IGST.
The same principle applies where the freelancer and the client are in different States and the applicable place-of-supply rules result in the place of supply being outside the supplier’s State.
What GST rate should freelancers charge?
There is no single GST rate applicable to every freelance service. The rate depends upon the exact nature and classification of the service under GST.
For many commonly provided professional and business services, the applicable rate is 18%, but freelancers should verify the relevant SAC and notification before issuing the invoice.
For example, if a taxable service attracts GST at 18% and the taxable invoice value is ₹1,00,000:
Taxable value: ₹1,00,000
IGST @ 18%: ₹18,000
Invoice value: ₹1,18,000
The invoice should clearly mention the applicable tax rate, tax amount and place of supply where required.
What if the client is unregistered?
A freelancer can also provide services to an unregistered Indian customer. The treatment depends upon the customer’s location and the applicable place-of-supply rules.
For interstate B2C supplies, the GST portal requires reporting based on the place of supply. From August 2024 onwards, interstate B2C invoices above ₹1 lakh are reported separately as B2C Large, while interstate B2C supplies up to ₹1 lakh are reported under B2C Others.
GST Registration — an important point for freelancers
A freelancer should not assume that every interstate service automatically means GST registration is required regardless of turnover.
The GST registration provisions and applicable exemption notifications need to be considered together. Small service providers may benefit from the applicable registration-threshold exemption, subject to the conditions of the relevant notification.
Therefore, before taking GST registration, a freelancer should check:
Aggregate turnover
Nature of services
Location of supplier and customers
Whether the customer is registered
Whether any specific exemption applies
Invoice and compliance
Once registered, a freelancer providing interstate services should ensure that the invoice correctly contains the relevant GST details, including:
GSTIN of the supplier
Customer details and GSTIN, wherever applicable
Invoice number and date
Description and SAC of services
Taxable value
Applicable GST rate
IGST amount
Place of supply
Total invoice value
The GST portal itself uses the supplier’s State and place of supply to determine whether a transaction is interstate or intrastate.
Common mistake freelancers should avoid
One of the most common mistakes is deciding the tax merely by looking at where the payment was received or where the client’s bank account is maintained.
Vansh Bhatiya is an Accounts Executive in TAXAJ's Accounts & Taxation team. With over six years of industry experience, Vansh handles bookkeeping, tax filings and day-to-day compliance for clients. TAXAJ is a multi-disciplinary consulting firm spanning finance, taxation, legal, secretarial, FEMA and IPR, with offices in Delhi, Bihar, Bangalore and Goa.
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