You finish a project, open your invoice template, and stop at the tax line. Do you add 20%? Do you add anything at all? The client is in another state, or another country, and the last invoice you sent had a tax line only because the template came with one.
A freelance invoice with VAT or GST on it is a legal document with a specific job: it tells your customer how much tax you collected on the government’s behalf, and their accountant how much they may reclaim. Get the fields wrong and it stops working as a tax document. Your client loses the credit, calls you, and you reissue.
The rules genuinely differ by country. The underlying shape does not. Every tax invoice separates the net amount from the tax, states the rate applied, identifies both parties, and carries a unique number in an auditable sequence.
What follows describes how these systems work in general, with the field lists that matter most. Rates, thresholds and filing rules change, sometimes annually. Verify anything you are about to put on a real invoice with HMRC, the GST portal, the IRS, your state revenue department, or an accountant who knows your situation.
The short answer
Charge a tax only if you are registered to collect it. If you are, the invoice must show your registration number, the customer’s details, a description of the supply, the net amount, the rate applied, the tax amount as a separate figure, and the gross total. A UK VAT invoice adds a tax point and a unique sequential number. An Indian GST tax invoice adds the GSTIN of both parties where registered, an HSN or SAC code, the place of supply, and a tax split that depends on it: CGST plus SGST when supplier and place of supply sit in the same state, IGST when they do not. There is no VAT in the United States, and sales tax on professional services is a state question that is often a no and sometimes a yes. Confirm your position with your tax authority before you send.
The one rule that travels: only charge tax you are registered to collect
This holds everywhere and it is the mistake with the sharpest edges.
If you are not registered for VAT, you do not put VAT on an invoice. Not a line saying “VAT 20%”, not a note saying “plus VAT”, not a total that quietly includes it. Same for GST. Collecting a tax you have no authority to collect is treated far more seriously than forgetting to charge one, because the money was never yours and never reached the government either.
The other half of the rule is less obvious. If you are registered, you generally must charge on taxable supplies. Skipping it because the client is small or the amount is awkward is not an option available to you.
Registration is usually triggered by turnover crossing a threshold measured over a rolling period, with voluntary registration available below it. Those thresholds have all moved over the years, and several countries measure them differently for goods and services. I am not going to quote a figure that may be stale by the time you read this. Look it up with HMRC, the GST portal, the ATO or the CRA, and if you are near it, talk to an accountant about timing.
One wrinkle. Between applying and receiving your number you are usually still liable for tax from the effective date, but you cannot issue a valid tax invoice without the number. Common practice is to invoice the tax-inclusive amount with no tax line, then reissue properly once the number arrives. HMRC publishes guidance on exactly this.
What a UK VAT invoice must show
HMRC’s main VAT guide, VAT Notice 700, sets out the particulars a full VAT invoice must contain. Here is the working list, with what people get wrong against each one.
| Field | What it means | Where it goes wrong |
|---|---|---|
| Unique sequential number | Identifies the document within an auditable series | Duplicated numbers after switching software mid-year |
| Date of issue | The day you raised it | Backdating to land in a previous quarter |
| Tax point (time of supply) | The date the supply is treated as taking place | Left off entirely when it differs from the issue date |
| Your name, address, VAT number | Identifies the supplier | VAT number missing, which invalidates the whole invoice |
| Customer name and address | Identifies the recipient | Trading name used instead of the registered entity |
| Description of the supply | Enough detail to identify what was sold | “Consultancy” with no further detail |
| Quantity and unit price | Per line | Omitted on time-based work |
| Net amount and rate per line | The amount excluding VAT, and the rate applied | One blended rate across mixed-rate lines |
| Total net excluding VAT | The subtotal | Confused with the gross |
| Total VAT in sterling | The tax figure, in sterling even if the invoice is in another currency | Shown only in the foreign currency |
| Reason for zero rate or exemption | Where no VAT is charged | Blank, so the client cannot tell why |
Two of those deserve more than a table row.
The tax point is not always the invoice date
The basic tax point for services is the date the work is completed. Issue a VAT invoice or take payment before that and the earlier date usually becomes the actual tax point. Issue within a short window after completion, long set at 14 days, and the invoice date generally becomes the tax point instead. Confirm the current position, because it decides which VAT return the supply belongs in. For a job finished on 29 June and invoiced on 3 July, that is a whole quarter’s difference.
Simplified and modified invoices
For small supplies, retailers may issue a simplified invoice showing far less: name, address and VAT number, time of supply, description, rate, and the total including VAT. The value limit has long sat at £250 including VAT, but treat that as a figure to check rather than a fact. A modified invoice, showing VAT-inclusive values by agreement, exists for larger supplies to VAT-registered customers. Most freelancers need neither.
Your numbering scheme matters more than it looks, since “unique and sequential” is a requirement rather than a preference; invoice numbering systems covers the schemes that survive an audit.
What an Indian GST tax invoice must show
The particulars come from Section 31 of the CGST Act 2017 and Rule 46 of the CGST Rules. The list is longer than the UK one and more prescriptive about format.
- Your name, address and GSTIN
- A consecutive serial number, no more than sixteen characters, unique for the financial year, made up of letters, numerals, hyphens or slashes
- The date of issue
- The recipient’s name, address and GSTIN or UIN where they are registered
- For unregistered recipients above a value limit, their name, address, address of delivery, and the state name with its code
- The HSN code for goods, or the SAC code for services
- A description of the goods or services, and quantity where relevant
- The total value of the supply, and the taxable value after any discount
- The rate of tax, broken out by CGST, SGST, IGST, UTGST and cess as applicable
- The amount of tax charged, in the same breakdown
- The place of supply, with the state name, for inter-state supplies
- The address of delivery where it differs from the place of supply
- Whether tax is payable on a reverse charge basis
- Your signature or digital signature
A GSTIN is fifteen characters: two-digit state code, ten-character PAN, an entity number for that PAN in that state, normally a Z, then a checksum. The state code at the front of your client’s GSTIN is the first clue to the question in the next section.
Rule 47 sets a time limit for issuing an invoice for services, counted from the date of supply, which has been 30 days for most suppliers. E-invoicing with an invoice reference number and QR code applies above notified turnover thresholds that have been lowered repeatedly. Check both on the GST portal rather than against a blog post.
CGST plus SGST, or IGST: the split that decides everything
If you take one thing from this article, take this. It is the most common error on Indian freelance invoices, and unlike most invoicing mistakes it costs your client real money.
India runs a dual GST. The same total rate lands in different buckets depending on whether the supply crosses a state border. The trigger is not where your client’s letterhead says they are. It is the place of supply, defined in the IGST Act 2017, compared against your own registered location.
For services supplied to a registered person, the general rule in Section 12 puts the place of supply at the location of that recipient. Where the recipient is unregistered, it is generally their address on record, failing that your own location. Section 13 handles cases where one party is outside India.
Then the comparison:
- Your location and the place of supply in the same state or union territory: intra-state supply. You charge CGST and SGST, each at half the total rate.
- Your location and the place of supply in different states: inter-state supply. You charge IGST at the full rate.
The same job, both ways
Say Anjali is a freelance developer registered in Bengaluru, Karnataka, state code 29. She bills ₹1,00,000 for a month of work. Assume 18%, which has been the common rate for professional and IT services, though the GST Council revises the slabs and you should check the current notification for your SAC code.
Her client is in Bengaluru. Same state, so intra-state:
- Taxable value: ₹1,00,000
- CGST at 9%: ₹9,000
- SGST at 9%: ₹9,000
- Invoice total: ₹1,18,000
Next month she bills a client in Mumbai, Maharashtra, state code 27. Different state, so inter-state:
- Taxable value: ₹1,00,000
- IGST at 18%: ₹18,000
- Invoice total: ₹1,18,000
The client pays ₹1,18,000 either way. The arithmetic is identical. What differs is which government receives which share, and that is not a technicality you can smooth over.
Why getting it wrong hurts your client
Input tax credit does not move freely between these buckets. A Mumbai client handed an invoice showing Karnataka CGST and SGST cannot use it, because the state component belongs to a state they do not file in. Their accountant spots it, they refuse the invoice, you reissue. If it has already been filed, unpicking it is worse: the CGST and IGST Acts do contain a mechanism for tax wrongly paid as intra-state when it was inter-state, or the reverse, letting the correct tax be paid and the wrong tax refunded. That mechanism exists because the error is common. It is also slow.
One more case catches people out. If your client is outside India entirely, you are usually looking at export of services, treated as a zero-rated supply provided the IGST Act conditions are met, including payment arriving in convertible foreign exchange. Two routes exist: export under a letter of undertaking without paying IGST, or pay IGST and claim a refund. The currency and remittance side sits in invoicing international clients. The tax treatment deserves a chartered accountant, because the conditions are specific and the refund process rewards getting it right first time.
Once you know which split applies, building the document is mechanical. The free Invoice Generator lets you set the net, add tax as its own line with the rate stated, and export a PDF, all in the browser with nothing sent to a server, which matters when the document carries your registration number and your client’s. The Percentage Calculator is handy for checking that a halved rate adds back.
The EU pattern and the reverse charge line
Article 226 of Council Directive 2006/112/EC lists what an invoice must contain across the EU, and member states implement it in their own law. The list feels familiar: date of issue, a sequential number, your VAT identification number, the customer’s VAT number where they are liable, both full names and addresses, a description, the quantity, the date of supply where it differs from issue, the taxable amount per rate, the rate, and the VAT amount.
Where the customer accounts for the tax instead of you, the Directive calls for the mention “Reverse charge” on the invoice. Most people write something longer, referencing the relevant article, which is fine as long as the mention is there. Show the customer’s VAT number too, validated through VIES before you rely on it.
Zero-rated and exempt cases need a stated reason. An invoice showing no tax and offering no explanation leaves the recipient’s accountant guessing, and accountants who are guessing phone you.
The US, where there is no VAT and services are a state question
American freelancers reading the sections above may be wondering where their equivalent is. There isn’t one, and that is the source of most of the confusion.
There is no federal VAT and no federal sales tax in the United States. Sales tax is levied at state level, and in many places at city or county level too. Most states built theirs around tangible goods, so professional services, design, writing, consulting, development, often fall outside it. Often, not always. Some tax services broadly: Hawaii’s general excise tax and New Mexico’s gross receipts tax both reach services in a way a UK reader would recognise. Others tax specific categories, so a state that exempts consulting may still tax data processing or information services.
Two further complications. Home-rule cities in states like Colorado run their own sales tax with their own rules, so the state answer is not always final. And since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can require out-of-state sellers to collect based on economic activity rather than physical presence, with thresholds each state sets for itself and revises.
For most US freelancers billing business clients for professional services, the outcome is an invoice with no tax line. The client collects a Form W-9, and where the annual payment reaches the reporting threshold they issue a Form 1099-NEC after year end. Income tax on that money is yours to handle separately, usually through quarterly estimated payments, and a rough forecast with an Income Tax Calculator beats a surprise in April. None of that replaces asking your state revenue department whether your service is taxable.
Tax-inclusive or tax-exclusive, and how to write it
For business customers, quote and invoice exclusive. Show the net, the tax, the total. Your client reclaims the tax, so the net figure is what they compare against a competitor’s quote, and burying the tax makes you look more expensive than you are.
Consumers flip it. Many countries require consumer-facing prices to be shown inclusive of tax, and a headline price that grows at checkout is bad practice and, in places, unlawful.
The wording that saves arguments belongs in the contract, not the invoice: “All fees are exclusive of VAT, which will be added at the prevailing rate where applicable.” Without it, a flat “£5,000 for the project” reads as tax-inclusive, and if you register mid-engagement you absorb it.
Working backwards from a gross figure
Divide by one plus the rate. Do not subtract the rate.
A gross figure of £600 at 20%: £600 ÷ 1.20 = £500.00 net, so the VAT is £100.00. The intuitive-looking move, 20% of £600 = £120, is wrong by £20, and handing that £120 to HMRC means paying £20 of your own money for nothing. At 20% the shortcut is worth memorising: VAT is one sixth of the gross.
Same logic at 18% GST. A gross of ₹1,18,000 divides by 1.18 to give ₹1,00,000 taxable and ₹18,000 tax, which is Anjali’s invoice read from the bottom up.
Discounts follow the same rule of order. Apply the discount to the net first, then calculate tax on the discounted net, because tax is charged on what the customer actually pays. A 10% discount on £4,000 gives £3,600 net, £720 of VAT at 20%, £4,320 gross. Running it the other way gives a different and wrong answer, and the Discount Calculator is quicker than checking twice.
Rounding, and why per-line and total rounding drift apart
This looks trivial until an accounts payable system rejects your invoice over two pence.
There are two defensible ways to calculate tax on a multi-line invoice: per line, rounding each line and adding the rounded figures, or on the summed net once. They do not always agree.
Three lines at a 20% rate:
| Line | Net | VAT per line (rounded) |
|---|---|---|
| Research | £33.33 | £6.67 |
| Drafting | £33.33 | £6.67 |
| Revisions | £33.34 | £6.67 |
| Total | £100.00 | £20.01 |
Calculated on the total instead: £100.00 × 0.20 = £20.00. The per-line method gives £20.01. One penny, on three lines. On a thirty-line invoice the drift grows, and the client’s system, which almost certainly recalculates from the total, flags a mismatch and holds the payment.
Pick a method, apply it consistently, and make sure the figures on the face of the invoice add up. HMRC’s VAT guide describes the permitted approaches, including calculating per line item and rounding to the nearest penny, and has historically allowed rounding the total down in some circumstances. The detail has shifted over the years, so read the current notice. In India, Section 170 of the CGST Act deals with rounding tax to the nearest rupee, which removes the sub-unit question but not the per-line versus total one.
My own view, opinion rather than rule: calculate on the total wherever your system allows it, because that is what the receiving system will do when it checks you.
The same job in three places
One project, three treatments. Assume the rates below, and check yours.
| UK, VAT registered | India, GST registered (Karnataka) | US, professional services | |
|---|---|---|---|
| Net or taxable value | £4,000.00 | ₹4,00,000 | $5,000.00 |
| Tax line, same state or domestic | VAT at 20%: £800.00 | CGST 9% ₹36,000 plus SGST 9% ₹36,000 | Usually none |
| Tax line, other state | Not applicable | IGST 18%: ₹72,000 | Depends on the state and nexus |
| Total | £4,800.00 | ₹4,72,000 | $5,000.00 |
| Must appear | VAT number, tax point | GSTIN of both parties, SAC, place of supply | W-9 held by the client |
| Verify with | HMRC | GST portal or a chartered accountant | State revenue department |
The pattern: the UK and EU invoices carry one tax figure, the Indian invoice carries a split determined by geography, and the US invoice often carries nothing while still leaving a paperwork trail.
Where freelancers get this wrong
The tax line appearing because the template had one. A template built for a VAT-registered agency, used by an unregistered sole trader, produces an invoice claiming tax nobody is entitled to collect.
A registration number missing from an otherwise perfect invoice. Without it the document is not a valid tax invoice and your client cannot reclaim. They will notice, because their accountant will.
“Plus VAT” or “taxes extra” with no rate and no amount. A note promising tax later is not a tax invoice.
The wrong Indian split, usually because the freelancer used the postal address on a business card instead of working out the place of supply against the client’s GSTIN.
Charging domestic tax to an overseas business client because the template defaulted to it. The answer is not always zero, but it is rarely your standard domestic rate applied without thought.
Quoting a flat all-in fee, then registering mid-engagement, and finding the contract gives you no right to add tax. Expensive, and preventable with one sentence.
And the quiet one: no copy kept. HMRC’s digital record-keeping regime and India’s e-invoicing rules both assume structured records, not a folder of PDFs.
A pre-send checklist
- Confirm you are registered for the tax you are about to charge, and that registration is effective on the supply date.
- Confirm the rate applying to this service today, not the one you used last year.
- Establish the place of supply, which in India decides the CGST/SGST versus IGST split and elsewhere decides whether you charge at all.
- Put your registration number in the header, and the client’s where required.
- Give the invoice a unique number continuing your existing sequence.
- State the date of issue, and the tax point separately where it differs.
- Describe the supply properly, with an HSN or SAC code where required.
- Show net, rate and tax as three separate figures per line, then the totals.
- Check the totals add up on the face of the document.
- Save the file and record it in your books before you send.
Step 3 is the one to slow down on. Everything else is data entry; place of supply is a judgement, and it shapes the whole invoice.
Frequently asked questions
Do I charge VAT if I am not VAT registered?
No. You charge a tax only if you are registered to collect it. Putting a VAT line on an invoice without a registration number means collecting money you have no authority to collect, and it is treated seriously. Show your price with no tax line. Check your national threshold with HMRC or your own tax authority.
What must appear on a UK VAT invoice?
A unique sequential number, the invoice date, the tax point where it differs, your name, address and VAT registration number, the customer’s name and address, a description of what was supplied, the quantity and unit price, the net amount and VAT rate for each line, the total net, and the total VAT in sterling. Check HMRC’s VAT guide for the current list.
When do I charge CGST and SGST instead of IGST?
It depends on place of supply. If your registered location and the place of supply fall in the same state or union territory, the supply is intra-state and you split the rate into CGST and SGST. If they fall in different states, it is inter-state and you charge IGST at the full rate. Confirm the place of supply rules on the GST portal.
Do US freelancers charge sales tax on services?
Usually not, but it depends on the state. There is no federal VAT or sales tax in the United States, and most states tax goods rather than professional services. Some states tax services broadly, and some cities add their own rules. Check with your state revenue department before deciding, because the answer varies by state and by service type.
Should my freelance rate be quoted inclusive or exclusive of tax?
For business clients, quote exclusive and add the tax as a separate line, with contract wording saying fees are exclusive of VAT or GST. For consumers, many countries require a tax-inclusive display price. The risk of quoting a flat all-in figure is that you absorb the tax yourself if you register later.
How do I work out VAT backwards from a tax-inclusive total?
Divide by one plus the rate as a decimal. At a 20% rate, a gross figure of £600 divides by 1.20 to give £500 net and £100 of VAT, so the tax is one sixth of the gross. Taking 20% of the gross gives £120, which is wrong and overstates the tax. Confirm the rate that applies to your supply before you calculate.
What to do with all this
Most of the anxiety around tax on invoices comes from treating it as one big question. It is three small ones. Am I registered. What is the place of supply. What must the document show. Answer those in order and the invoice writes itself.
The second is where I would spend real attention, because it is the only one requiring judgement, and in India it changes the structure of the tax lines rather than just the number in them. The rest is a checklist you run once and reuse.
Then verify, not because the shape above is unreliable but because rates move, thresholds move, and e-invoicing rules keep arriving. Your tax authority publishes the current position, and an accountant will tell you in twenty minutes what a forum thread gets wrong over three pages.
Once you have those three answers for your own situation, put them into a template you reuse rather than rebuilding the layout every month. The Invoice Generator will hold the shape for you, tax as its own stated line, and export a clean PDF without your registration numbers leaving the browser.