GST: Will we be required to reverse input credit under the new tax regime?

GST, Tax

I am a freelance software developer with an annual turnover of Rs 22 lakh and Rs 26 lakh in the past two years. As a freelancer, how will GST be charged to me? There are two more people who work with me but all the billing is done in my name. 


As a freelance software developer having a turnover of over Rs 10 lakh during the previous year, I understand that you would currently be having a service tax registration. Under the GST law, any person who is registered immediately preceding the date of GST implementation is mandatorily required to obtain GST registration. Accordingly, you should be required to obtain GST registration. 

For any goods/services you procure from a supplier registered under GST law, the latter will charge either Central Tax (CGST) and State Tax (SGST) or Integrated Tax (IGST), depending upon whether the transaction qualifies as an inter-state or within the state transaction. The rate for such goods/ services would be, as in the schedule released by the government.

You should be eligible to claim the input credit on such tax charged, so long as the procurements have been made against your GST registration number and such procurements in furtherance of business (barring certain specific procurements for which input tax credit is restricted). Your eligibility to claim input tax credit would also be subject to the vendor undertaking correct GST compliances.


We supply goods under a scheme where the customer is allowed free goods of certain quantity if he buys a minimum quantity over a period of two months. In order to not lose revenue, we charge the fully-agreed amount and free goods sold as part of the scheme are billed at zero value to account for stock. Will we be required to reverse input credit under the GST regime?  


The GST regime envisages liberal input tax credit provisions. As per such provisions, any expense incurred in the course or furtherance of business should be available as input tax credit, unless a specific exclusion is prescribed.

There is no specific restriction under GST law that requires a person to reverse, the input tax credit for goods supplied free of charge, except if these are supplied as gifts or samples.

In your transaction, the goods being supplied cannot be regarded as gifts (considering that free goods are subject to purchase of specified quantity of goods) or samples.

Considering the aforesaid, in absence of any specific restriction, you should be entitled to claim input tax credit on the goods being supplied, even if no separate consideration is charged for the same.
The writer is tax partner, PwC India. Aditya Khanna, the associate director, contributed to this column. 
The views expressed are experts’ own. 
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