A personal consultant or freelancer, a person, not employed in a company or business and paid to various clients for work done on a contract basis in a variety of short- and long-term jobs. A personal advisor provides services to the client without an employer-employee relationship. Such individuals do not have to go to the office but instead engage with clients and prospective clients in their own workplace/home to carry out project-specific or task-centered work. Consultancy services in India offer a wide range of staffing requirements for financially savvy, less tiring, and efficient training. This encourages the merger to focus fully on their core business and avoid overburdening in-employees. It offers long-distance benefits to the organization and its workers. In this article, we will discuss the importance of GST consultancy services and GST registration.
Before you understand the procedure, you now need to confirm some facts about GST (Goods and Services Tax).
Understand About GST on Consultancy Services
GST is a complete indirect tax levied on the sale, production, and consumption of goods and services across the country. This is a separate line for supplying goods from the manufacturer to the user. GST is important only in value addition at each stage. However, GST registration is mandatory to register the business of consultancy services.
Rate of GST on Consultancy Services
GST rate will the rate charge to consultancy firms –
The GST rate on consultancy services attracts 18% of the GST rate. Counseling is related to health, finance, investments, and so on.
SAC Code applicable for Consultancy Services
The following SAC (Service Accounting Code) has begun for various advertising services in India.
- SAC Code 9983 – Other consultants, Technical and business services
- SAC Code 99831 – Management consulting and management services; Knowledge Technology Services.
- SAC Code 998312 – Business consulting services including public relations services
So these are the important points including the Consultancy Services in India.
Registration of GST on Consultancy Services
So this raises the question, is it necessary or not necessary for individual consultants in India to register under GST? No, not necessarily. As a service provider, a personal advisor is required to register under GST in the following circumstances:
- Turnover above Rs. 20 lakhs in any financial year (not applicable to the North-Eastern States);
- When turnover crosses Rs.10 lakhs in any Financial Year;
- Providing cloud-based services such as online information and database access and recovery services, advertising on the Internet, online gaming services, e-books, music, movies, software, and other intangibles to sell data or information in the electronic form to any person through a computer network; Recovery or any other form of granting;
- In the case of an export agency whose cost exceeds Rs.20 Lakh.
One advantage of being a personal advisor is that the annual value of its services is less than Rs 20 lakh and such a person does not need to register himself as a business immediately. Personal advisors are well placed to register themselves as sole proprietors if their annual income exceeds Rs 20 lakh.
Can GST on Consultancy Services opt for Input Tax Credit?
Individuals doing business will buy goods/receive services to deliver more goods in the course of the business. When such a purchase is made by him, the tax will be levied by his supplier and levied on him. Since the tax is collected from him, he can get a loan of the tax he paid to his supplier.
This is called the input tax credit for the recipient. According to the provisions of the GST Act, all ordinary taxpayers registered under the GST, including personal advisers, can use the ITC to reduce their GST liability. Similarly, registered personal consultants or freelancers may use the taxes paid for the services used by them to provide any service.
Does GST on Consultancy Services have to file returns?
Individual Consultants once registered under the GST framework, are required to file 25 GST returns in a financial year if he/she is registered as a normal taxable person. GST income is filed on a quarterly or monthly basis if the revenue and consultant mix are part of the plan. Composition sellers or dealers and those with annual sales of less than Rs 1.5 crore can file quarterly income.
Penalty for delay in filing GST returns
Under the GST framework, a late charge of Rs.200 is levied in case of delay in filing of GST returns. Also, to calculate taxpayers, 18% interest per annum is charged. Failure to pay the GST Act carries a penalty of at least Rs.10,000 and for the amount of tax not paid, the maximum penalty is 10% of the amount of tax payable. For the amount of tax not paid, the maximum penalty is 10% of the amount of tax payable.