The Effect of GST on Freelancers

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On 1st July 2017, the entire Indirect Taxation system of India got overhauled and previously charged Indirect taxes ranging from VAT to Service Tax got abolished. Goods and Service Tax, popularly known as GST, was introduced with a view to increasing the tax payer base in the country. People working across sectors have their perception clear as to how this revolutionary change is going to affect them, but Freelancers is such an aspect that had always remained in doubt in terms of taxation norms. Previously there were no specific tax rules that were governing freelancers, which often led to confusion and many freelancers had to face cascading effect of taxation on their services. But GST has cleared its part and the impact that it will have on freelancers can be considered to be both positive and negative.

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Positive impact of GST on Freelancers

While many people are criticizing the implementation of GST due to the negative aspects it will be having in few sectors, freelancers need not worry much. GST has several positive effects on freelancers’ working areas.

Availability of Input Tax Credit: Previously if freelancers used to sell online or offline software services, then the cost incurred on VAT, CST or Excise had to be treated as an expense, as freelancers were not allowed to set off this amount with their output tax liability. After the advent of GST, it is no longer the case. Now freelancers can claim the amount they incurred on VAT, CST or Excise at the time of purchasing any product for their work purpose. This will considerably reduce their tax burden by a considerable amount.

No cascading effect of taxation: Previously freelancers working as service providers had to pay both VAT and Service tax, which automatically enhanced the cost of their services. VAT was charged on the product they provided and Service Tax was charged on their service part. But under GST, the liability of tax will be calculated only once and not twice. This will help freelancers save a lot of money that previously they had to shed in terms of tax liability.

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Negative impact of GST on Freelancers

Everything has both positive and negative sides. Unlike others, even GST has some negative impact on people working as Freelancers.

Increased tax rate: Previously freelancers had to pay service tax which was charged flat 15% on their revenue amount. This 15% was inclusive of both Krishi Kalyan Cess and Swach Bharat Cess. But now Freelancers are expected to fall under the tax bracket of 18%. The increased rate might cause problems for many freelancers.

Increased legal compliance: Previously freelancers need not file several returns for the work being done by them. Maximum 4 returns would suffice. But now freelancers will have to file around 4 returns in a month, which can be troublesome for many. Increased compliance will also be accompanied by increased cost of compliance. There are many freelancers who don’t have any idea about GST and how to file returns under this system. Hence they will have to appoint a professional who will look after this work. This will lead to extra expenditure on their part.

If we go by the provisions of GST, it is bearing good effects on some freelancers while it is bearing a negative impact for other freelancers. However, the best part is the threshold limit to get registered under GST for freelancers has been increased to Rs.20 lakhs, which was previously Rs.10 lakhs. Hence many small scale freelancers will benefit from GST at large.

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5 Things you can save on post implementation of GST

A month has already passed since the GST or the Goods and Services Tax has been implemented on the 1st of April, Indians are gradually feeling the effect of the general price increase throughout the country. While there are many who have already started going on a pre-GST shopping spree with the thought of paying a much less amount, some others are left pondering over the fact that they’re missing out on such offers. However, the only good news after the implementation of GST is that there are few businesses which have taken the decision of absorbing the costs and not passing the burden of GST to their customers. So here are few things on which you can save money post-GST implementation.

#1: Eating out in hotels and restaurants

There are many who have resorted to cooking at home for compensating the increase in prices for eating out. The people of Malaysia can rest assure that there are few famous restaurant chains which have decided to reduce the burden on their customers by maintaining or lowering their prices. Food chains like McDonald’s, KFC and Dominoz Pizza have decided to absorb the GST and they are doing so without adversely hurting their business. So, you can still save money by eating out.

#2: Beauty and Fashion

For the people who are fashion-conscious, there isn’t any worry about not being able to maintain the latest trends. Zalora, a fashion retailer online announced that they will absorb the GST rates on all items. Zalora is a Malaysian brand which has not only decided not to hike its prices by the 6% GST levels but they have also decided to apply a 6% discount on all customers, thereby even lowering the prices by 5% as compared to pre-GST prices.

#3: Cars

Are you looking forward to buying cars? If yes, then there are both foreign and local makes which have decided to absorb GST rates. Perodua will reduce prices of their vehicles between 0.1% and 1.6% depending on different models. Volkswagen has even updated its prices on all variants and models, thereby maintaining their net selling prices. However the insurance will definitely be subject to its own 6% GST.

#4: Tech gadgets

Technology geeks may rejoice when they get to know that they can continue to get their latest in electronic gadgets. Oppo is a smartphone maker which manufactures really awesome devices like the R5 and N3 and they have committed to absorbing GST their gadgets and this translated to 0% increase in the retail price of the phone. Hence, you can still buy your gadgets at their best prices.

#5: Wholesalers and General Retail

There are still places to cater for families which are looking to shop for few essential items or for those who are hunting for good deals to satisfy their needs for impulsive shopping. With a whole range of items like electronics, hardware, household, textiles and foods that are available, families feel safe to know that they can still get their essentials without having to pay extra.

Therefore, if you’ve been worried about the extra payments that you have to pay on various things post GST-implementation, consider the above mentioned points.

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GST and its impact on your personal finances – How should you adjust yourself?

The Goods and Services Tax or the GST has come into effect since the 1st of July, 2017 and it has just started creating a stir in the country, the consumer economy and especially among the business sectors. This new initiative by the finance minister is anticipated to enhance the entire procedure of tax collection and give a huge boost to the Indian economy. According to the latest news on GST, the personal finances of every individual will be impacted in a similar manner.

You must be intrigued to know how the GST will impact your finances. So, here we bring forth a few areas that will be affected by GST and how you should adjust your financial strategies.

#1: Mutual funds

Goods and Services Tax will lead to a slight increase to the expense ratio which is charged by mutual funds for purposes of fund management. As per experts managing funds will be considered as a service provided and hence this used to be subject to 15% in service tax and now that the GST is here, it will be charged at 18%.

#2: Banking

All kinds of transactions like loan processing in India, credit card payments, fund transfers and cash withdrawals will be a bit more expensive with 18% tax which has come into effect due to GST. But in the near future, the increase in tax collections will be normalized through input credit which can be claimed by the banks under the GST regime. Other services like fixed deposits and savings will stay as they are. You have to lower the number of transactions as this is the best way in which you can alleviate the blow from GST as it is coming on the customers.

#3: Insurance

As tax rates will go up to 18%, the costs that you have to pay in buying insurance policy and maintaining it will even move up slightly. Taxes are going to be 18% in the first year for all individual term policies and even on the premium that is there for renewal. For every 100 Rs. that you pay towards your premium, you have to give away Rs. 18 as GST too. Previous insurance plans, the traditional ones which had service tax of 3.7% on the premium will have 4.5% in the first year of GST.

#4: Gold

Gold is going to become even costlier and there is another proposal for 3% taxes on gold and on gold jewelry. They can even claim input tax credit in case of gold jewelry and this can be adjusted with the other taxes, as long as jewellers are concerned. If there are customers who sell back their gold to jewellers, they will not be able to get extra cost while buying the same again.

Therefore, if you’re worried about how the GST will impact your finances, you can take into account the above changes that it has brought to different areas of finances. Adjust the way you spend on things so as to stay on top of your finances.


GST FAQ – For all the confused Indians who are worried about GST and its impacts

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On Friday midnight, 1st of July, the whole country’s eyes were glued to their television sets as the brand new taxation policy, the GST or Goods and Services Tax system was introduced within the nation. The GST personifies ‘one nation – one tax’ phrase. Now the goods and services tax will fall under 5 categories, 0%, 5%, 12%, 18% and 28%. Arun Jaitley, the finance minister has reportedly said that after the implementation of the new tax system, inflation will fall, avoiding taxes will become difficult and the Gross Domestic Product of India will also benefit in a big way. Let’s take a look at few GST FAQ reading which the confused Indians can clear their doubts on the new buzzword.

#What is GST exactly?

GST has to be paid when a consumer purchases something. This tax will be levied on all transactions in the supply of services and goods, apart from few items like petroleum products. The tax that is levied at one stage can be deducted later on from the tax to be paid in the next stage. India has got a dual GST, Central GST and State GST. Apart from CGST and SGST, there is also an integrated GST (IGST) which is applicable on the inter-state supply of services and goods and this can be set off against SGST and CGST which has to be paid.

#Who will decide the rates of GST?

The GST council which includes the union finance minister (who will also be appointed as the chairman of the council) and the finance ministers of state will finalise the rates of GST.

#Where do you have to register for GST?

The GSTN or the Goods and Services Tax Network is a private, non-government company and the central government holds 24.5% stake. They will provide you with IT infrastructure and services of support to the governments, taxpayers and other providers of the service for the implementation of GST.

#Initial relaxation of rules for the 1st 2 months

The GST council has relaxed the norms for tax filing for 2 months, July and August2017 for all those who are still into maintaining manual records or who are in the process of GST transition. The council has finalised a simple form as per the Central Board of Excise & Customs, the government department supervising the GST implementation. There wouldn’t be any late fees or penalties for filing late and the regular returns would have to be filed since September.

#Which items will be covered through GST and which won’t be covered?

Few regular use consumer items like pulses, cereals, dairy products, fish, fresh meat, fresh fruits and vegetables are exempt from GST, as per data provided by the government. Different skill development services and education have been granted exemption, as per government sources. Alcohol, electricity and 5 petroleum products like petrol, crude oil, diesel, natural gas and aviation turbine fuel will be out from GST. They will attract central excise and VAT.

Therefore, now that you know the basics of GST, you must not feel confused any longer about how it works and what impact it can have on your life.


Ways in which GST is going to set its impact on the economy


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Although it is true that lower Goods and Services Tax (GST) will reduce inflation but it won’t lead to an economic growth significantly in the short term. However it is definitely going to benefit the Indian government in the medium term, as per what experts have to say. Majority of the economists predict the inflation to come down as the GST rates for most of the goods have already been fixed at a special rate, which is pretty low.

The introduction of GST will now prompt India Inc to reorganise their business as the nation switches itself to the regime of GST which will pull smaller companies into the tax bracket. Although it is not optimal, let the best not be enemy of the good. There are lots of imperfections of the GST but at the same time, it could also usher noteworthy benefits as well. It is going to give a quantum leap in logistical efficiencies and transaction trails. Let’s take a look at the few impacts of GST in the near future.

#1: GST will shake corporate operations

With the new taxes called GST, too many companies will have to restructure the way they operate their business. Now companies have to insist their suppliers and vendors to give invoices as GST will make it extremely strict for companies who had been evading taxes. The bigger companies are able to reap benefits from GST as they have a supply chain which can offset taxes that are paid on inputs. As compliance cost will rise, smaller companies may have to spend more.

#2: Passing the benefit of low taxes

Finance Minister, Mr. Arun Jaitley will keep a close supervision on whether or not the companies are passing over the benefit of low taxes to the consumers. The experts believe that while corporates would pass the direct advantages of GST, they would have a goal of retaining it partly the indirect benefits from the saving in the form of costs of logistics, streamline of business process and flow of input credits.

#3: Inflation will be low enough

Analysts have no doubt about the fact that inflation will keep low as GST rates on important goods like household consumer items, food grain and other essential services will be either excluded or kept lower. But assuming that GST has the intended impact of increasing tax compliance, the burden of taxes would increase, and this was said by Morgan Stanley in a note. The companies would pass on costs of higher tax compliance to the consumers at a later stage.

#4: RBI might not curb rates in June

Inflation is expected to ease off further with the rollout of GST from a record low of 3% in the month of April and as per analysts, RBI would not lower policy rates immediately. RBI will watch out for monsoon progress and even how the GST pans out. In the last policy RBI has flagged issues that the one-off GST impact might not even be inflationary.

While the GST is going to be positive for promoting economic growth in short term, it will also improve the ease of running a business, luring more foreign investors and bolstering investor sentiment.


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