Lesson 1 of 2 · 8 min
A different tax altogether
GST is charged on the supply and collected from the client, so it is never a slice of your own income — and it starts mattering at ₹20 lakh of turnover.
Myth
“GST is another income tax — once I cross the threshold, the government takes a second cut of my earnings.”
False
Income tax is charged on your profit. GST is charged on the supply itself, added on top of your price, collected from the client and passed on to the government. It flows through you rather than out of you. The two taxes are run by different departments on different portals, and crossing the GST threshold changes nothing about your income tax.
So the government takes another cut of what I earn?
KabirTara
Kabirasking
Let me get this straight. Once I cross the threshold, eighteen per cent of my earnings goes away — on top of the income tax I already pay?
Taraexplaining
No. Eighteen per cent gets added to what your client pays, and your client is the one paying it. You put it on the invoice, hold it, and hand it to the government in your return.
Kabirasking
Then why does everyone talk about it like it costs them money?
Taraexplaining
Because it lands in your bank account first and looks exactly like your own money for a few weeks. That is the whole trap. Spending it is easy, and it was never yours to spend.
Kabirasking
Does my actual fee change at all?
Taraexplaining
Your fee stays your fee. What changes is the total on the invoice, and whether the client minds — a business client usually does not, because your invoice gives them credit they can use.
Mechanically: a registered freelancer quotes ₹50,000, adds 18% GST, and the client pays ₹59,000. The ₹9,000 was never yours — you hold it briefly and deposit it with the government in your return. Until your turnover reaches the registration threshold, none of this applies and your price is simply your price.
GST registration thresholds, tax year 2026-27
- Suppliers of services
- ₹20 lakh aggregate turnover
- Suppliers of goods
- ₹40 lakh aggregate turnover
- Services, in special category states
- ₹10 lakh aggregate turnover
This is the threshold that applies to most freelancers.
The lower limit for special category states — the threshold is not ₹20 lakh everywhere in India.
Quick check
You earn ₹9 lakh from tutoring and ₹13 lakh from design work in the same year, on the same PAN. Has the ₹20 lakh services threshold been crossed?
Check yourself
1 / 3
Kabir asks
You are registered, you quote ₹50,000, and the client pays ₹59,000. Whose money is the ₹9,000?
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