Whether to charge CGST & SGST or IGST?

As per IGST Act, Sec. 2(13) ‘intermediary’ means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;

The person earning the commission will falls under this definition.

As per IGST Act, Sec. 13(8) – The place of supply of the following services shall be the location of the supplier of services, namely:–

  • services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;
  • intermediary services;
  • services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month

It is cleared from above provision that, the place of supply will be location of the supplier of services.

As per IGST Act, Sec. 2(6) – “export of services” means the supply of any service when,–

  • the supplier of service is located in India;
  • the recipient of service is located outside India;
  • the place of supply of service is outside India;
  • the payment for such service has been received by the supplier of service in convertible foreign exchange; and
  • the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

In the above provision sub-clause (iii) is not satisfied. Therefore, it is not export of services.

As per IGST Act, Sec. 7 (1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in––

 (a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

 (3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in––

 (a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

 shall be treated as a supply of services in the course of inter-State trade or commerce.

 (4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.

(5) Supply of goods or services or both,––

(a) when the supplier is located in India and the place of supply is outside India;

(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or

(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,

shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

The person doesn’t fall under any of the condition. Therefore, IGST is not applicable. 

Conclusion:

The person should charge CGST and SGST in the invoice. 

Disclaimer: The above views and the opinion expressed or implied are on the knowledge of the author and the individual or company is advised to take due care and judgment before taking any decision.

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Qualification: CA in Practice
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Location: Gujarat, IN
Member Since: 16 Jun 2018 | Total Posts: 3

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18 Comments

  1. JINAL says:

    what if an Intermediary is facilitating the trade of goods between a Foreign Party & a SEZ manufacturing unit in India and receiving the commission from the Foreign party in Convertible foreign currency ( USD/ Euro).

    In the above case I believe the condition of ” The place of supply of Service is outside India” as the SEZ manufacturing unit is treated as a unit outside India as per SEZ law.

    Pls comment if the GST on commission received would still be applicable?

    Regards,

    JINAL

  2. shubham talwar says:

    I am running a Education Consultancy pvt ltd co, I recruit students and consult them for future studies in reputed foreign colleges and in exchange I receive commission from Colleges in foreign currency, is I liable to pay GST on this commission Received from these colleges.

  3. Suneel Kumar Jain says:

    In a deal where buyer and sellers are foreigners and v r 4 persons acting as intermediaries to make the deal go through. V earn commission in it. V sign NCNDA but the seller, who has to pay commission, says he will allow only one person’s name in IMFPA to give commission in name of one person only. That one person will distribute to others.

    Sir, if v trust each other and depute a person amongst us, to receive the commission, and he further distributes to other 3 intermediaries.

    In this distribution, if all intermediaries are from India, will gst be attracted?

    Second instance if a company is designated as Paymaster on fee then does that distribution by the Paymaster will attract gst?

  4. Suneel Kumar Jain says:

    In a deal where buyer and sellers are foreigners and v r 4 persons acting as intermediaries to make the deal go through. V earn commission in it. V sign NCNDA but the seller, who has to pay commission, says he will allow only one person’s name in IMFPAgive commission in name of one person

  5. Eustace says:

    I am an indian resident. If I facilitate a deal between Seller Country Malaysia and Buyer country Egypt and the seller agrees to pay me 50 dollars per metric ton. How will I get taxed on this income.Do I have to pay GST on this, if so how much percent? Is there a cap on the income you can earn in like this as per RBI

  6. RAJASEKHARA RAO says:

    We are trader in Hyderabad. We are purchased products from American Manufacturer. They have given commission in dollars directly our bank account. We have paid 18% GST on commission basic value and GST return filed. Can I have input taking on paid GST on sales commission.

  7. RAJASEKHARA RAO says:

    We are trader in Hyderabad. We are purchased products from American Manufacturer. They have given commission in dollars directly our bank account. We have paid 18% GST on commission basic value and return filed. Can I have input taking on paid GST on sales commission.

  8. Sudip Ganguly says:

    Since, Inter Company Commission is falling under Intermediary Services hence GST is attracted on the Taxable Services and needs to be discharged accordingly. In this context, one GST Registered Indian legal entity receives Inter Company Commission from it’s Associated Foreign Entity on account of goods shipped to their customer. Indian Entity Raises GST Invoices re # Commission Services with Charging 18% GST. Here my question is – Since the foreign entity raises Credit Note on Indian entity towards this Commission, my question is do they need to add 18% GST as well or just need to raise Credit Note on Indian entity for Gross amount considering both total commission and applicable GST Amount.?

  9. PRADEEP MODH says:

    GERMAN COMPANY SOLD ONE EQUIPMENT THROUGH US.
    Our roll is just go to importer and installed the same.
    there is no payment transaction with indian customer and also we are not issuing any invoice. We are receiving commission from Germany. What about GST . and GST is refundable or Not ..

  10. Narendran says:

    If a Broker in india, does consulting service between two foreign countries, and receive commission from foreign, will it still be taxable or non taxable .

  11. Kaustubh says:

    One may argue that this transaction would be an intra-state supply as per the provisions of Section 8(2) of the IGST Act, 2017.
    However, Section 8(2) is ‘subject to the provisions of Section 12′. a view may be taken that to fall under Section 8(2) of the IGST Act, 2017, it is necessary to qualify the parameters of Section 12 of the IGST Act, 2017. Section 12 deals with place of supply when location of supplier and recipient is in India. Hence, it can be argued that since Section 12 is not at all applicable to intermediary services provided by a supplier in India to foreign parties, Section 8(2) would also not be applicable to this supply. On this analogy, a view can be taken that the said transactions amount to an inter-state supply as per Section 7(5)(c) of the IGST Act, 2017 attracting IGST. your views please

  12. Kaustubh says:

    Article is very informative. But will it not get hit by the sentence ” Subject to Section 12″ under Section 8(2) and therefore Section 8 will not be applicable and IGST will be payable under Section 7. Want your advice soecifically on ” Subject to Section 12″

  13. Manoj Tambat says:

    Continuing on your explanation,

    what if an Intermediary is facilitating the trade of goods between a Foreign Party & a SEZ manufacturing unit in India and receiving the commission from the Foreign party in Convertible foreign currency ( USD/ Euro).

    In the above case I believe the condition of ” The place of supply of Service is outside India” as the SEZ manufacturing unit is treated as a unit outside India as per SEZ law.

    Pls comment if the IGST on commission received would still be applicable?

  14. Manoj Tambat says:

    Continuing on your explanation,

    what if an Intermediary is facilitating the trade of goods between a Foreign Party & a SEZ manufacturing unit in India and receiving the commission from the Foreign party in Convertible foreign currency ( USD/ Euro).

    In the above case I believe the condition of ” The place of supply of Service is outside India” as the SEZ manufacturing unit is treated as a unit outside India as per SEZ law.

    Pls comment if the IGST on commission received would still be applicable?

    Regards,

    Manoj Tambat

  15. CA Prasanna Krishnan V says:

    It cannot cause CGST + SGST liability.

    In the given case, Place of Supply and Location of supplier are not in same state; hence there is no Intra State supply (Ref: Sec 8 (2) of IGST Act 2017).

    Section 7 (5) (c) of the IGST Act 2017 [Supply of service is in the taxable territory, not being an intra-State supply and not covered elsewhere in this section] squarely covers the given case. Hence, it shall cause IGST liability.

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