GST liability on commission agents brokers
A revolutionary change in Indian history is the good and service tax. One of the primary areas where many uncertainties and questions are raised regarding the Goods and Service Tax is whether GST is applied to commission and brokerage. Know all about it through this article.
Basics about GST Liability on Commission Agents
“Commission normally refers to income received by an individual for mediating a deal between two parties and receiving a cut of the sale’s proceeds. In such a case, the commission received is subject to GST as a service at a rate of 18%. Regardless of the taxpayer’s annual turnover limits, every commission and brokerage income is subject to GST registration. “Regardless of turnover, persons who make taxable supply of goods, services, or both on behalf of other taxable persons, whether acting as an agent or not, shall register.”
Intermediary under GST
In general, a person who arranges or facilitates the delivery of commodities, the provision of services, or both, between two people without material alteration or additional processing is referred to as an “intermediary.” The supply between the principal and the third party and the supply of his own service (agency service) to his principal, for which a fee or commission is often charged, are the two suppliers an intermediary is therefore associated with at any given time. An intermediary in relation to goods (such as a commission agency, i.e., a buying agent or selling agent, or a stockbroker) is excluded by definition for the purposes of this rule. A person who prepares or facilitates the provision of a service—referred to in the rules as “the main service”—but performs the main service on his own account is also exempt from this sub-rule.
Principal and Agent Responsibilities Under GST
When an agent purchases things on behalf of his principal, both the principal and the agent are equally and severely responsible for paying GST on those taxable items. For instance, suppose M/s X hires Mr. Y as an agent to market its products. For M/s X, Mr. Y sells these items to Mr. Z. In this instance, if either party fails to pay the GST on such products, M/s X and Mr Y are jointly and severally responsible. All taxable value of supplies made by an agency, including the sale or purchase of advertising space or time, are subject to GST at 18% and must be paid through GST Return Filing.
Here are some of the services offered for a fee, commission, or under contract: Land or building sales. any wholesale or retail commerce service. service for managing properties. service for appraising real properties. Services provided by commission agents to negotiate large-scale business deals. A seller of goods or services is often obligated to pay GST. A reverse charge mechanism, however, is sometimes used to oblige a recipient of goods or services to pay GST. The reverse charge mechanism covers services rendered by a broker or a commission agent to the following people: Financial institution, a bank
GST compliances for agents
Regardless of the taxpayer’s annual turnover restrictions, every commission and brokerage income is subject to GST registration. Commission agents are exempt from the registration requirement’s threshold restriction. Therefore, once a person meets the criteria for being considered an agent as stated above, they must get mandatory registration. If someone is making a taxable supply in India, he might register himself as a NRTP (Non-Resident Taxable Person). However, since the location of supply is outside of India and reverse charge does not apply to Indian exporters, if an Indian exporter pays a commission to an FCA (foreign commission agency), he is not required to pay GST.
Furthermore, According to the GST Act, every registered commission agency or agent must submit the following returns:
- GSTR-3B – Monthly summary return.
- GSTR-1 – Return for reporting outward supplies.
- GSTR-9 – Annual return.
- GSTR-5 and GSTR-5A – Non-resident foreign taxpayers.
Maintenance of Books of accounts: All agents are also required to maintain accounts showing details of:
- permission from the principal to deliver or receive items on his behalf.
- quantity and cost of the products and services obtained on the principal’s behalf. Account details that are sent to the principal.
- Taxes paid on behalf of the principal’s delivery or receipt of goods or services
Thus, Online Bookkeeping and Accounting Services will also be beneficial and mandatory for you.
Exemptions under GST for Commission Agents
A number of the services rendered by commission agents are GST exempt. This includes the services rendered to the Central Government for the sale of rice, wheat, and other coarse grains, as well as to the state governments or Union Territories for the sale of kerosene, sugar, edible oil, etc. by fair price shops (those licenced to distribute essential commodities by an order issued under section 3 of the Essential Commodities Act, 1955, to the holders of ration cards under the Targeted Public Distribution System). In addition, support services for forestry, fisheries, agriculture, and animal husbandry are free from GST.
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