An agent is defined under the GST law as a person who carries on the business of supply of goods or services on behalf of another person (principal). An agent includes a broker, commission agent, factor, auctioneer, or a mercantile agent. He carries out activities under the principal-agent relationship.he general GST rate on commission and brokerage services is 18%. This rate applies to most types of brokers and commission agents, such as stock brokers, insurance agents, mutual fund agents, and customs house agents.
Applicability of GST for Brokers and Commission Agents
As per Section 7 of the CGST Act read with the Schedule I, ‘Supply of goods, by a principal to his agent or by an agent to his principal, where the agent supplies such goods on behalf of the principal’ is chargeable to GST even if made without consideration, but for conducting business.
The definition of an agent, as discussed above, includes ‘supply or receipt of goods on behalf of the principal’. Thus, a principal-agent relationship is an essential factor for determining whether a transaction is covered under the definition of an agent.
For this, it is essential to understand whether the agent is carrying out the activity as a representative, i.e. ‘supplying or receiving the goods on behalf of the principal.’ The key criteria for determining the existence of a principal-agent relationship is ‘how an invoice is raised?’.
- If an invoice is raised in his name (agent’s name) – It would be covered under Schedule I transactions and thus liable to GST.
- If an invoice is raised in the name of principal – Not covered under Schedule I.
Taxes before and after GST
Mr Aryan; a commission agent charges Rs.5,000 as his service charge within India.
| Particulars | Taxed Under Service Tax Regime (Rs) | Taxed Under GST (Rs) |
| Value of taxable supplies | 5,000 | 5,000 |
| Service tax @ 15% | 750 | – |
| CGST @ 9% | – | 450 |
| SGST @ 9% | – | 450 |
| Total GST | – | 900 |
| Invoice Value | 5,750 | 5,900 |
Thus, the introduction of GST has increased the tax burden on brokers and commission agents.
GST Rates for Commission Agents and Brokers
GST at 18% is applicable on the taxable value of supply provided by a commission agent or broker, including the sale/purchase of advertising space/time. Following are some of the services provided for a fee/commission or on a contract basis:
- Sale of land/building.
- Any retail/wholesale trade service.
- Property management service.
- Real estate appraisal service.
- Commission agent services to negotiate wholesale commercial transactions.
Usually, a supplier of goods/services is required to pay GST. But, in some cases, a recipient of goods/services is required to pay GST called a reverse charge mechanism. Services provided by a broker or a commission agent to the following individuals are covered under reverse charge mechanism:
- Banks
- Financial institutions
GST Registration for Brokers and Commission Agents
- Visit the official GST portal (https://www.gst.gov.in/)
- Click on the “Services” tab and select “Registration”
- Fill in the required details and submit the application
- Upload the necessary documents (e.g., PAN, Aadhaar, address proof)
- Wait for the application to be processed and approved
FAQs
Q1. Can ITC be Claimed on Commission?
Yes, ITC can be claimed on commission paid to agents if the commission is incurred for business purposes and all the conditions and requirements under the GST law are met.
Q2. What is the GST code for brokerage services?
The GST service accounting code (SAC) for brokerage services is 997159, which falls under the category of “Other supporting services n.e.c.”
Q3. What is the GST limit for brokerage?
The GST limit for brokerage is the same as the general registration threshold, i.e., ₹20 lakhs (₹10 lakhs for special category states) in a financial year. If your aggregate turnover from brokerage services exceeds this limit, you must register under GST.
Q4. GST Exemptions for Brokerage and Commission?
The following services provided for commission are exempt under GST:
- Services by fair price shops:
- To the Central Government on sale of rice, wheat, and other coarse grains.
- To the state government or Union Territories on sale of kerosene, sugar, edible oil, etc.
- Support services to agriculture, forestry, fishing, and animal husbandry.
- Services under cultivation of plants and rearing of all life stock (except horse), such as:
- Direct agricultural operations
- Farm labour supply services
- Certain agricultural processes like tending, pruning, cutting, harvesting, drying, sun drying, etc.
- Renting/leasing of agro machinery or a vacant land
- Warehousing and storage activities of agricultural produce
- Extended agricultural service
- Services provided by an Agricultural Produce Marketing Committee
Q5. Is GST applicable to all types of brokerage services?
Yes, GST is applicable to all types of brokerage services, including insurance, real estate, stock market, and travel, among others. The standard GST rate of 18% applies to most brokerage services, with a few exceptions and exemptions as mentioned earlier.
