Updated: 30th Nov, 2017
Added documents and procedure for submitting Letter of Undertaking (LUT)
- Apply for GST
- Submit LUT to the government, if you receive any income from outside india (Adsense, Paypal, International Affiliates)
- No need to submit bank guarantee or bond
Updated: 21st Nov, 2017
- Added Video of filing monthly GST filing yourself.
Updates on 11th Oct, 2017
A big relief to online entrepreneurs who were shutting down their business because of GST complexities.
A small scale freelancer who was earning about 100,000 rupees per year can not hire a CA who will charge thousands of rupees to keep GST compliance.
Government amended certain rules to help startup level entrepreneurs.
- Exemption from GST registration if aggregate turnover is less than 20 Lakh per year (10L for special states)
- 20L exemption rule is applicable even for inter-state services
- Quarterly filing of GST returns
I waited for this rule till September but government pushed everyone to apply for GST. I was afraid of losing business from my clients who were asking me to provide GST number so that they can get GST expenses as input credit.
I applied for GST but you can avoid GST compliances if your annual income is below 20L.
GST is replacing the service tax that online entrepreneurs used to pay earlier in which there was an exception until the income hit the 10L annual revenue from service business.
Let me explain everything in the most simple way from my personal understanding.
In two cases, you are liable to register for GST.
- If your income is more than 20L (10L for special states) then you have to get GST number.
GST is 0% on the export income when you submit LUT to the government. I have explained the process in the middle of the article.
Disclaimer: You are advised to consult your CA for the legal taxation advice. I am your friend not a legal consultant.
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Services outside India
Export income is still exempted from the GST.
Export income for online entrepreneurs means if you receive any income comes from a foreign registered company. In most of the cases, export income comes through Paypal or wire transfer from the clients.
Adsense income, Affiliate Income from Foreign registered company, Freelance income from Paypal is considered as export income.
You have to register for GST if your income exceeds 20L in the financial year.
You can submit a Letter of Undertaking for export services and file 0% GST, without LUT you have to submit 18% GST on your export income.
You also have to maintain all the records of your business because the authorities can ask you for the details of your business anytime.
Services within India
You have to register for GST, if your annual income is more than 20L (10L for special states).
The standard rate of GST is 18% for services provided online – like writing, designing, digital marketing and advertisements. You have to use SAC number for your services. I use following SAC but you can consult with your CA or tax consultant.
- SAC 998365 – Sale of Internet advertising space
- SAC 998311 – Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management
- SAC 999294 – Other education and training services
- SAC 998399 – Other professional, technical and business services
Your invoices should clearly show your business Name, Address, Invoice Date and your GST number, your client’s GST number (if B2B service), GST amount and total amount.
You have to collect GST from your clients and deposit to the Government.
There are 2 sub-components of GST
- Center GST – 9%
- State GST – 9%
In the online business world, it’s rarely a case that all of your clients are based in the state where your business is registered.
Most of the offline businesses (doctors, lawyers, architects, accountants, shops) may have all the clients in the same state, so there is one exemption for them.
Carry on reading till the end…
Exemptions for GST
You can become eligible for GST exemption upto 20L of annual turnover.
Following state registered businesses get the exemption upto annual revenue of 10L.
- Arunachal Pradesh
- Jammu & Kashmir
- Himachal Pradesh
Big businesses are registered as Private Limited or LLPs but small business owners (like me) do not have to spend money on registering their business as Pvt. Ltd.
You can easily run your business on your name or as a proprietorship firm (For GST purpose, both are same since your personal PAN card is your tax identity)
(I will explain in a separate article how to register your proprietorship firm).
You can register yourself with GST on your own name if you have a valid PAN card. Your business name will be Your Own Name in that case.
#1. Freelancers – If you are a freelance writer, designer, developer or digital marketer who is providing services of more than 20L annually.
#2. Bloggers – You have to pay GST, if you are making online income through blogging. It can be a client for whom you provided sponsored article, income from advertisements or getting a commission as an affiliate.
#3. Affiliate Marketers – If your income comes from any affiliate marketing network based in India (Vcommision, Mindtech, Optimise, Amazon.in, Flipkart) then you have to pay GST.
#4. YouTubers – Same as bloggers, Youtubers also have to register for GST if they annual income is more than 20L.
#5. Digital Marketers and Agencies – You also have to come under GST if your business is above 20L per year.
#6. E-commerce – Anyone selling through online market places or their own e-commerce website.
#1. If you have income only from Adsense – Then you have to file GST as export income
#2. If you are a freelancer/consultant – Then register yourself as proprietor. Use your personal PAN card for GST application & tax filings.
But for how long?
It’s better to register with GST to get the benefits of input credit on your expenses. Big companies are asking for GST number from every freelancer/consultant and you have to come under GST soon or later.
One Sweet Benefit of GST
You might have heard only the bad things about GST – high tax rate, uncertainty, enforcement and headaches for small business owners.
You will get benefit of GST amount that you pay on your business expenses. GST on expenses will be adjusted in your GST returns against the GST that you pay on your business income.
In simple words, GST paid on your business expenses will come back to your pocket as GST credits.
For example, if you spent Rs. 10,000 on Facebook Ads and paid Rs. 1800 as GST to Facebook, then you will get that money adjusted to your net payable GST while filing the GST returns.
Note: You have to provide your GST number to these companies so that it can be tracked online.
Similarly, GST charged by broadband/telephone company, office rent and similar… will come back to your account in the final GST return. If you are buying any equipment for your business then ask the supplier to include your GST number in the invoice.
So next time when you will buy a laptop, AC, mobile, chair or even camera for your business purpose, you can get that GST adjusted in your returns.
Application process to get a GST number
GST application process is totally online and very simple. You can get your GST number in a few days after completing your application.
You can register for GST at URL – https://reg.gst.gov.in/registration/
You can start with filling up PAN number and the state where your business is registered.
If you are running a proprietor business then fill up Your Own Name in Legal Name of Business column.
I filled up “Pardeep Kumar Goyal” as my Legal Business Name however my proprietor business name is “Startup Karma”
You will be allotted Temporary Reference Number and will be able to complete the application by login through OTP received on your mobile.
In the next screen, you can fill up your business name under the column ‘Trade Name’ (I filled up Startup Karma in that)
You have to submit the application within 15 days after you start the procedure. Be prepared to upload your documents for address/business proof.
You will get your GST number upon approval of your application. I heard that TRN number can be also be used as GST number till your application is approved.
Process of LUT Documents for GST for Export Income
You have to prepare 2 sets of documents that can be downloaded from the following link
Click Here to Download the copy of LUT Documents that I submitted to the government.
I am sharing the actual copies of my documents so that you can easily replace GST Number, Your Name, Your Company Name and Your address.
Don’t submit the documents with my name 🙂 Make sure you remove my details and put your details everywhere.
Along with the LUT documents you will also need following documents.
- Arrange a Rs 100 stamp paper on Your Name
- Self attested KYC proof of Yourself and of 2 witnesses.
- Self attested GST certificate
- File name “GST_LUT Format” to be attested by Notary.
Submit the documents to your GST officer (Find those details on GST website).
Note: Share your experience in the comments so that everyone can learn from each other.
GST Return Filing Schedule
If you have a GST Registration No. you are also required to file GST Returns every month. Even if your sale for the whole month was Rs. 0 – you still have to file GST Returns every month.
For example, for the Oct Business, you have to file the returns as mentioned below
- GSTR 1 – Due on 31 Mar
- GSTR 2 – Dates not announced yet
- GSTR 3B – 20th Mar (Monthly Return and payment of tax)
Now you have to file monthly returns of GST.
I have recorded a video when I was filing my returns of Oct month.
I am sure you will be able to file your monthly GST returns easily if you are maintaining all your invoices. (Subscribe for YouTube Channel for future video updates)
I have used ClearTax GST software that is easy to generate invoices and prepare GST returns.
GST rules can still be changed. I will keep you updated through this article only.
I will keep you updated about the GST rules. -> (Bookmark this article & subscribe to the updates, I will update this article only rather than writing a new post every time)
I take help from CA Karan Batra when in doubt, he shares his knowledge on his blog CharteredClub – You can read his article on GST rules for reference.
You can book a consulting call with him if you need any professional help. You can get extra 50% discount in addition to existing 30% discount on his consultancy service – by using discount code CASHOVERFLOW at the time of booking a call with him.
Stay connected with the experts, I will keep updating the article whenever there is any change in GST rules.