GST Registration for Freelancers & Consultants Exporting Services

A Deep Dive into Place of Supply, Deeming Provisions, and Relevant Legal Interpretations

Introduction

India’s GST framework is designed to balance compliance requirements with ease of doing business, particularly for independent professionals and small exporters serving international clients. A critical question arises for professionals such as consultants, freelancers, and software developers earning less than ₹20 lakhs annually from export of services:

“Am I required to obtain GST registration?”

This is not a mere compliance formality. Registration impacts cash flow, refund eligibility, and regulatory obligations. This post presents an exhaustive legal analysis with all relevant statutory provisions, notifications, judicial precedents, and practical considerations to empower you to make an informed decision.

Summary for Quick Readers

• Threshold Limit (Section 22 CGST Act): Registration is mandatory only if aggregate turnover exceeds ₹20 lakhs (₹10 lakhs for certain special states).

• Export of Services Definition (Section 2(6) IGST Act): Export qualifies if supplier is in India, recipient outside India, place of supply outside India, payment in convertible foreign exchange or permitted INR, and supplier and recipient are not related establishments.

• Export of Services are Zero-Rated (Section 16 IGST Act): Taxed at 0% with Input Tax Credit (ITC) refund eligibility.

• Compulsory Registration (Section 24 CGST Act): Overrides threshold for inter-State supplies, reverse charge, or e-commerce; however, exemptions apply for exporters with turnover under threshold (Notification No. 10/2017).

• Deeming Provisions for Use/Enjoyment in India (Section 13 IGST Act): Place of supply rules affect taxation if services are used or enjoyed in India, even if supplied to foreign entities.

• World Bank and Multilateral Agencies: Special deeming provisions exempt such supplies from GST if funded by such bodies (Notification No. 7/2017).

• Judicial Clarifications confirm no registration if turnover < ₹20 lakhs and no ITC refund claimed.

Background Scenario

You are:

• An independent professional (consultant, freelancer, software developer, etc.),

• Providing services to foreign clients located outside India,

• Receiving foreign currency or RBI-permitted INR as consideration,

• Having aggregate turnover (domestic + export) less than ₹20 lakhs in a financial year.

Applicable Legal Provisions and Their Interpretation

1. Section 22(1), CGST Act 2017 — Threshold for Mandatory Registration

Text:
“Every supplier shall be liable to be registered under this Act in the State or Union territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees…”

Interpretation:

• Aggregate turnover includes all taxable supplies (domestic and inter-state), exempt supplies, exports, and non-taxable supplies.

• If total turnover is less than ₹20 lakhs (₹10 lakhs in special category states), registration is not mandatory.

2. Section 2(6), IGST Act 2017 — Definition of Export of Services

A service qualifies as “export of services” if all of the following conditions are satisfied:

• The supplier of service is located in India;

• The recipient of service is located outside India;

• The place of supply of service is outside India;

• The payment for such service has been received in convertible foreign exchange or in Indian rupees wherever permitted by RBI; and

• The supplier and recipient are not merely establishments of a distinct person (i.e., not related branches/entities).

3. Section 16, IGST Act 2017 — Zero-Rated Supplies

Export of services is a zero-rated supply under GST, meaning:

• The supply is taxable but at a rate of 0%,

• Input Tax Credit (ITC) on inputs and input services used for export is eligible for refund.

Interpretation:

• Exporter may supply either by paying IGST and then claiming refund, or

• Supply without IGST payment under a Letter of Undertaking (LUT), and claim refund of accumulated ITC.

4. Section 24, CGST Act 2017 — Persons Required to Register Regardless of Threshold

Key Clauses:

• 24(i): Persons making inter-State taxable supplies,

• 24(iii): Persons liable to pay tax under reverse charge,

• 24(x): Persons supplying goods or services through e-commerce operators.

Do exports trigger Section 24(i)?

• Exports are inter-State supplies under Section 7(5)(a), IGST Act.

• But Notification No. 10/2017 (Integrated Tax), dated 13 October 2017, exempts persons making inter-State supplies with turnover below ₹20 lakhs from compulsory registration.

5. CBIC Circular No. 70/44/2018-GST (26 October 2018)

Clarifies:

“Exporters with turnover below threshold are not required to register unless they want to claim refund of unutilized ITC.”

6. Section 13, IGST Act 2017 — Place of Supply Rules and Deeming Provisions

Place of supply determines whether the transaction is taxable in India or outside India. Relevant rules:

• Rule 3: Location of recipient in case of services;

• Rule 4: Place of supply of services related to immovable property;

• Rule 6: Place of supply of services consisting of hiring of means of transport;

• Rule 7: Place of supply of services where the location of supplier and recipient are in India;

• Rule 12: Intermediary services;

Deeming provision for use/enjoyment:
Even if recipient is outside India, if service is used/enjoyed in India, the place of supply is India (e.g., consultancy used in India).

7. Deeming Provisions for World Bank and Multilateral Agencies — Notification No. 7/2017-Integrated Tax (GST)

Services supplied to multilateral agencies such as the World Bank are exempt if the payment is from funds provided by such agencies for specified projects.

This means:

• Services provided under World Bank projects are considered out of GST ambit or exempt,

• Even if used in India, specific notification exempts such supplies,

• Clarifies the place of supply and avoids cascading taxation.

8. Judicial Precedents and Clarifications

• The Kerala High Court in SITV Americas LLC v. Union of India (2020) reiterated the necessity of satisfying all conditions in Section 2(6) of IGST Act for export of services.

• The CBIC clarified repeatedly (Circular 70/44/2018, Notification 10/2017) that registration is not mandatory below threshold for exporters who do not claim ITC refund.

Decision Matrix for GST Registration

Situation	GST Registration Required?	Reason
Export of services, aggregate turnover < ₹20 lakhs, no ITC refund claimed	❌ No	Exempt under Section 22 and Notification 10/2017
Export of services, aggregate turnover < ₹20 lakhs, ITC refund claimed	✅ Yes	Refund of ITC requires GSTIN as per Section 16 of IGST Act
Aggregate turnover > ₹20 lakhs (including exports)	✅ Yes	Threshold for compulsory registration breached
Supply through e-commerce operator	✅ Yes	Section 24(x) overrides threshold
Domestic supply under reverse charge mechanism	✅ Yes	Section 24(iii) requires registration

Documentation to Maintain (Even If Not Registered)

Document	Purpose
Invoice with “Export of Services” remark	Demonstrates nature and place of supply
Foreign Inward Remittance Certificate (FIRC) / Bank advice	Proof of receipt of foreign currency
Agreement/Contract with foreign client	Establishes contractual terms and recipient’s location
Proof of place of supply (e.g., communication)	Supports classification under Section 2(6) IGST Act
Letter of Undertaking (LUT) (if registered)	Required to supply without IGST and claim ITC refund

Real-World Example

Scenario:
Ms. Asha is a freelance software developer based in Bangalore. She provides software customization services to a client in the US. In FY 2024-25, her total turnover (including exports and a small domestic project) is ₹18 lakhs. She receives payment in USD.

Decision:

• Since aggregate turnover is below ₹20 lakhs,

• Export of services meets all conditions in Section 2(6),

• No refund of ITC is being claimed,

• Ms. Asha does NOT need to register under GST as per Section 22 and Notification 10/2017.

She must maintain proper documentation like invoice and FIRC to substantiate export status.

Frequently Asked Questions (FAQs)

Q1: What if payment is received in INR but allowed by RBI?
A: Export of services qualifies if payment is in convertible foreign exchange or INR permitted by RBI under FEMA guidelines.

Q2: Can I supply partially to domestic and partially to foreign clients without GST registration?
A: Aggregate turnover includes all supplies. If total exceeds threshold, registration is mandatory.

Q3: What if I want to claim refund of unutilized ITC on exports?
A: You must register under GST to claim ITC refund even if turnover is below ₹20 lakhs.

Q4: What if I supply through an e-commerce platform?
A: Registration is compulsory regardless of turnover under Section 24(x).

Q5: Are services under World Bank projects exempt?
A: Yes, subject to Notification No. 7/2017, such supplies funded by World Bank are exempted.

Penalties and Risks

Failure to register when mandatory may attract:

• Penalty under Section 122 of CGST Act (up to ₹10,000 or tax amount),

• Interest on tax due,

• Disallowance of refund claims,

• Reputational and compliance risks.

Hence, non-registration below threshold is safe only if no refund claim and proper documentation is maintained.

Final Conclusion

Under a holistic reading of:

• Section 22 & 24 of CGST Act 2017,

• Section 2(6), 16, 13 of IGST Act 2017,

• Notification No. 10/2017 (Integrated Tax),

• Notification No. 7/2017 (Integrated Tax) for World Bank projects,

• CBIC Circular No. 70/44/2018-GST,

• Judicial clarifications,

an independent professional exporting services and earning less than ₹20 lakhs in aggregate turnover is NOT required to obtain GST registration if they do not claim refund of ITC.

Registration becomes mandatory if turnover exceeds ₹20 lakhs or if refund of ITC is desired.

Understand when GST registration is mandatory for your export services business — backed by statutory provisions, notifications, and judicial precedents.