While GST registration is not mandatory for freelancers/startups (below Rs. 40 lakh turnover), the same helps avail Input Tax Credit (ITC). For instance, it is common for freelance writers to receive their payment through Paypal. Now, once you update your GST registration no. with Paypal, you can claim ITC:
A freelancer or business entity can apply for GST registration for free. The downside of maintaining a GST no. by choice is each month or quarter, you need to file returns.
Often, freelancers and startup founders fail to leverage incentives provided by the government. While buying a laptop, there is 18% GST. If you are buying a laptop for your business use, just quote your GST no. to reduce cost by 18%, which is your right. Needless to say, such savings will help you leverage scarce capital for your core business endeavors.
So, instead of having your business order placed through amazon.in as consumer, why not have an amazon.in business account?
Now, claiming ITC is a process that appears to be not totally automated once you are logged into your GST portal for filing.
GSTR1, GSTR2A and GSTR3B are related in an interesting way. GSTR2A is the place where I can view all the purchases I have made quoting my GST No. with Input Credit Tax paid that I can seek to claim. In case you are sure that you have made a purchase or there is a transaction that is missing, you need to contact the seller. This aspect needs vigilance. There is a time limit of 6 months from the date of purchase or transaction that you can claim ITC.
So, for instance, even if you fail to claim your ITC credit while filing April GST return in the month of May, you can well claim the same till the month of September.
In order to claim your ITC, all you need to do is visit GSTR2A forms of the preceding months, note down the total IGST, CGST, SGST under each head, sum up the same on a piece of paper/Excel sheet and while submitting GSTR3B form (table 4), append the same.
Now, while filing the GST return for the month of June, it came to my notice that a laptop bought on 22nd June, 2019 for my office use had an invoice in which GST no. of mine not recorded. So, the same will never show on my GSTR2A. I contacted the seller who has since updated my GST credential and the same should reflect later on GSTR2A.
So, here is the take:
(a) Whatever transactions you are sure has happened during the preceding month, make a note of them, sum up the IGST, CGST, SGST.
(b) Visit GSTR2A of the preceding months to see if there is any transaction that you have failed to take credit of. If yes, note down the IGST, CGST, SGST.
(c) Now, add up the total (a+b), and in Table 4 of GSTR3B, fill them.
After submitting the same, here is the screenshot:
It is imperative that the products on which ITC claimed are genuinely used for the business purpose. While transactions related to payment of office rent leaves little confusion, the same may not be true for laptop which can be well for personal use. So, although you take the initiative to claim ITC refund from your side, the final verdict from the taxman may challenge your contention.