You run a GST-registered business, you hired a freelance designer or developer, and the invoice has landed in your inbox. Now you wonder whether you owe the government GST on top, because you have heard the words reverse charge. Most people guess wrong here, either paying tax twice or skipping tax they owe. This post explains GST when you hire a freelancer, who pays it, and the short list of services where the buyer, not the seller, has to pay.
The short version: you do not pay reverse charge just because your freelancer is unregistered. Reverse charge applies to services on a notified list and to a few notified classes under Section 9(4). A freelance designer, writer or developer is not on the services list. The rest of this post shows you where the line sits and what to check on the invoice.
You pay GST on a freelancer's invoice only if the freelancer charges it, or the service is on the RCM list
In the normal case, the freelancer collects GST from you on a tax invoice and deposits it. You pay what the invoice shows. Reverse charge is the exception, where the buyer pays the tax directly and the seller charges none. A service falls under reverse charge only if it appears on the list notified under Section 9(3) of the CGST Act. If your freelancer's work is not on that list, there is nothing for you to pay on your own.
This is a common blind spot. People hear that the buyer pays GST in some cases and assume it covers every purchase from someone without a GSTIN. It does not. Section 9(3) lists the services, and Section 9(4) covers only notified classes, so there is no blanket reverse charge on purchases from unregistered suppliers.
What reverse charge means for the buyer
Under reverse charge, you pay the GST to the government instead of the supplier. You pay it in cash, and you can claim input tax credit on it if the service is used for your business. The supplier's invoice then carries no GST, because the liability has moved to you.
That means reverse charge adds a task to your month, not just a cost. You compute the tax yourself, deposit it, and report it in your return. If you buy only design, writing, coding or marketing work from individuals, this task never arrives. The sections below explain why.
The services where you pay: advocates, goods transport agencies and imports
You pay reverse charge on legal services from advocates, goods transport agency services and imported services. The list notified under Section 9(3) (Notification 13/2017-Central Tax (Rate), dated 28 June 2017) names the services where the recipient pays. Two entries matter most to people hiring individuals. Legal services from an individual advocate or a firm of advocates to a business entity are one, and goods transport agency (GTA) services are the other. The list has been amended since 2017, so read the current text on the GST portal.
For advocates, the Ministry of Finance clarified in July 2017 that legal services by an individual advocate or a firm of advocates to a business entity in the taxable territory fall under reverse charge. A business entity below the GST registration threshold may not have to pay. Check the current notification before you skip the tax.
For a goods transport agency, the position depends on the GTA's own choice. If the GTA charges GST itself under the forward-charge option, you have no reverse charge liability. If it does not, the recipients covered include a factory, society, cooperative society, registered person, body corporate, partnership firm or casual taxable person. An individual who does not fall in one of those groups is not covered. The GTA's rate depends on the option it picked, so read it off the invoice or ask the transporter.
Imports are the third big case. Services you buy from a supplier outside India are taxed as IGST under reverse charge, which is the situation covered in the guide on reverse charge GST on foreign software and ads. It is a separate rule from hiring someone in India.
Why an unregistered freelancer's service is usually not reverse charge
An unregistered freelancer's design, writing or development work does not trigger reverse charge in the ordinary case. Section 9(4) of the CGST Act, the provision that deals with purchases from unregistered suppliers, applies only to notified classes of registered persons receiving notified goods or services. It has operated on that narrower basis since 1 February 2019. The notified class is promoters of residential real estate projects. No freelancer service is notified under Section 9(4).
So if a registered company buys logo design from a solo designer who has no GSTIN, the company does not pay reverse charge on it. The designer sends a plain invoice with no GST on it, not a tax invoice.
What a registered freelancer must charge, and what to check on the invoice
A freelancer who is registered for GST must issue a tax invoice and charge GST. An unregistered freelancer issues a plain invoice with no GST. Services registration thresholds are ₹20 lakh of turnover, or ₹10 lakh in special category states, in force since 1 April 2019, so many small freelancers sit below the line and never charge GST. The guide on when freelancers must register for GST explains when registration becomes compulsory.
When an invoice arrives, check which kind it is. A registered freelancer's tax invoice should show a GSTIN and the tax charged. An unregistered freelancer's document should be a plain invoice with no tax line, as described in the post on tax invoice versus plain invoice. And if GST appears on an invoice from someone with no GSTIN, ask them to explain before you pay it.
Tax deducted at source is a separate matter from GST. TDS on the freelancer's fee is an income tax rule, and the guide on TDS when hiring a freelancer covers it, including how separately shown GST is treated in the TDS base.
Reverse charge in your books: cash payment and input tax credit
If you do owe reverse charge GST, you pay it in cash through the portal, and you can claim input tax credit on it if the service is used for your business. The credit usually comes back, but the cash goes out first, so it affects your working capital for the month.
Reverse charge is rarely a permanent cost for a registered business that makes taxable supplies. It is a cash-timing cost, and a paperwork cost. If your own outputs are exempt or you are not registered at all, the credit may not be available to you, and the tax becomes a real cost. Your CA can tell you which side you fall on.
What to ask your CA, and what Rinto covers
Ask your CA three questions: whether any service you buy sits on the current Section 9(3) list, whether your freelancers' status changes anything for you, and how to book the credit. The guide on hiring a subcontractor as a freelancer covers the contract and payment side of bringing in help, including the GST on a subcontractor's invoice.
On the invoices you send, Rinto creates GST-ready invoices with automatic IGST/CGST/SGST calculation, so the tax lines on your own invoices follow your client's state. It does not file returns or give tax advice. For the wider invoicing rules, see the GST invoice guide for freelancers. This post is general information, not tax advice, and rules and notifications change, so confirm with a chartered accountant or the GST portal before you act.
Frequently Asked Questions
Do I pay GST if I hire an unregistered freelancer?
Not as a general rule. A GST-registered business does not pay reverse charge just because it buys from an unregistered freelancer. Section 9(4) of the CGST Act covers only notified classes of registered persons buying notified goods or services, and the notified class is promoters of residential real estate projects. No notified entry covers a freelancer's design, writing or development work. The freelancer should give you a plain invoice with no GST on it. If a service you buy is on the Section 9(3) list, the answer changes, so check the notification.
Is reverse charge applicable on legal services from an advocate?
Yes, in the common case. Notification 13/2017-Central Tax (Rate) lists legal services from an individual advocate or a firm of advocates to a business entity, so the business entity pays the GST, not the advocate. The advocate's invoice carries no GST, and you compute, deposit and report the tax yourself, then claim input tax credit on it if the service is used for your business. A business entity below the registration threshold may not have to pay. Check the current notification before you skip the tax.
Do I pay GST on goods transport agency charges?
It depends on whether the transporter charges GST itself. A goods transport agency can choose forward charge, and if it charges GST on its invoice, you have no reverse charge liability. If it does not, reverse charge applies when you are one of the listed recipients, such as a factory, society, cooperative society, registered person, body corporate, partnership firm or casual taxable person. An individual who is not in one of those groups is not covered. The rate depends on the option the transporter chose, so read the invoice and ask the transporter which one applies.
Can I claim input tax credit on reverse charge GST?
Yes, if the service is used for your business. Reverse charge tax has to be paid in cash first, and the credit comes after you have paid, so your cash goes out before the credit arrives. A registered business that makes taxable supplies can usually recover it this way, which makes reverse charge a timing cost more than a permanent one. If you are not registered, or your own supplies are exempt, you may not be able to use the credit, so the tax can stay a real cost.
Does a freelancer under the threshold have to charge GST?
A freelancer below the registration threshold does not have to register. The threshold for services is ₹20 lakh of turnover, or ₹10 lakh in special category states, in force since 1 April 2019. Such a freelancer issues a plain invoice, not a tax invoice, so you as the buyer see no GST line on the document. The details of that document are covered in the guide on tax invoice versus plain invoice. Once turnover crosses the threshold, registration becomes compulsory and the freelancer must issue tax invoices.