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Agency vs Freelancer in India: GST Status Determines True Cost Premium

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A development agency founder in India has highlighted a widely overlooked cost factor in the freelancer-versus-agency debate: the buyer's own GST registration status. Since most Indian freelancers bill without GST (being under the ₹20 lakh threshold) while agencies charge 18% GST, the real price gap depends on whether the client can claim input tax credit. For GST-registered businesses, the agency premium works out to roughly 20% after reclaiming the tax; for unregistered buyers such as individual founders or small trusts, the same agency quote becomes about 42% more expensive. The article also flags TDS compliance under Section 194J as a common friction point, noting that freelancers unfamiliar with the rule often misread a correctly withheld 10% deduction as underpayment. The author recommends clients ask vendors upfront, in writing, about GST registration and TDS accounting to avoid the two most frequent payment disputes in Indian software projects.

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Agency vs Freelancer in India: GST Status Determines True Cost Premium · ShortSingh