Commission from a foreign entity

- It is an export of services which is treated as zero-rated supply. Export is an inter-state supply. If the value of commission is more than Rs.20 lacs then you are required to obtain GST registration but not liable to pay GST. You need to show the commission value in the returns. You can claim refund of ITC for the business expenses.

Hello,

Assuming you are not providing your services as an agent of the Chinese manufacturers.

Your marketing services to foreign clients would be considered as export of services if the consideration is received in convertible foreign currency. GST would be applicable but covered under Zero-rated supply and shall be relieved on GST. The exporter can opt for any of the following two options: i. To supply goods or services under a bond or, a Letter of Undertaking (LUT) without paying IGST and then claim a refund of unutilised ITC; or ii. To supply goods or services on payment of IGST and then claim the GST refunds of such tax paid.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Hi,

Hope you are doing well !!

You need to get GST registration only if your turnover/receipts exceeds the basic exemption limit.

You services will be classified under export of services as you will be providing services to foreign clients only.

Under GST regime, the exporter has either of the two options:

• Export under bond (LUT) without payment of tax
• Export along with tax payment and claim refund later

Hi

If your business is a commission based model, GST shall be applicable @18% on the commission amount.

Such transactions are not covered under the zero rated supplies - export of services as for intermediary services, the place of provision of service becomes India and hence it is not an export.

We may discuss the issues further.

Hello Sir,

As per my understanding, your services fall under the category of intermediary services, place of provision of services will be place of service provider (I.e. India)

Definition of intermediary is contained under section 2 (13) of Integrated Goods and Service Tax Act, 2017 and the same is reproduced here under for ready reference ;

“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”

-GST registration is mandatory for intermediary services without any threshold limit.

-Intermediary generally charge commission against the services provided by them.

-The commission income so earned is subjected to GST@18% and all the provisions of GST law is applicable accordingly.

-Basically GST is a collection from customer and not from own pocket.It is upto you how to collect it from customer either by increasing the commission amount or charging GST separately on the current commission.

-In case there is no commission for a particular period, you will have to file NIL returns. GST shall have to be paid for the month in which invoice is made OR payment is received- whichever is earlier.

You need to pay GST as you are providing an intermediary service if the total your service exceed 20 lakh. Since, in your case the supplier is located outside India you don't need to get compulsory registration u/s 24.

However if you also have some principal in India then you need to take compulsory registration.

This wont fall under category of export of service as place of supply would be India so I dont think you would be able to claim refund.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.