IN MY OPINION NO CHANGE IN BUSINESS MODEL REQUIRE ...AS WHOM YOU ARE SAYING SUB DEALER THEY ARE WORKING ONLY AS YOUR AGENT AND YOUR ARE PAYING COMMISSION TO THEM(THIS WILL ATTRACT GST ON REVERSE CHARGE BASIS IF THEY ARE NOT REGISTERED). AS THEY ARE NOT MAKING BILLING NOR THEY ARE SELLING GOODS AS DEALER THEY ARE NOT REQUIRED TO PAY ANY TAX ON AMOUNT DEPOSITED IN BANK(EXCEPT CTT/ CASH COLLECTION CHARGES). I SUGGEST YOU TO OPEN A ACCOUNT IN YOUR NAME / FIRM NAME AND ASK ALL SUCH AGENT TO GET MONEY DEPOSITED IN THAT ACCOUNT EITHER AS CASH OR CHEAUE(DIRECTLY RECEIVED FROM CUSTOMERS) TO AVOID PROBLEM IN INCOME TAX
GST implications for sub-dealer business model
This is the scenario: We have a retail shop, we receive goods from manufacturer and we sell goods at our counter. We also have people in rural areas (but within state) that sell the goods on our behalf. The goods in question are two wheelers. Till now, they would collect money from the customer, deposit money in their account and give us a cheque for the number of vehicles they sold. E.g. if each vehicle was 40,000 Rs. and they sold 5 today in the evening they would send us the details of each customer for billing and a cheque for 2 lakh rs. For each vehicle sold we would pay these people a commission of set amount, e.g. 1000 Rs. per vehicle. They would pay VAT/Tax on that amount. With GST in play, it is out understanding that the sub dealer putting money into their account and then transferring it to us will attract a separate tax. Is that correct? What is the solution under GST law for this kind of business setup?
Asked 8 years ago in GST
They already did the bank to bank transfer and it wasn't an issue for income tax. Question is, will it be an issue under GST?
Asked 8 years ago
NO
Hi,
Your sub dealer will charge GST to you on his commission. If he is unregistered, then you have to charge GST on reverse charge.
Please feel free to call/ revert in case you need more clarity
Thanks and regards
Abhishek Dugar
CA CS B.Com
Thanks, yes, we would pay GST on commission. That we knew. Biggest confusion with all dealers seems to be on whether Sub Dealers can deposit customer money first into their account and then our account or not. Local GST consultant said no, but that didn't make sense to me.
Asked 8 years ago
Sir as per basic thing is that to whome u r saying sub dealer technically they are agents .... if they are selling in there name they are liable to pay gst but as you said that you are making bill to customers and paying commission to agent in that case they are only service providers .....but in any case they are required to maintain separate account for transaction.....technically in such case we suggest our client to get opened an account in his name / firm name to avoid future complication ........because as you are saying them sub dealer if tax officer also goes for same interpretation he can issue demand note for tax.....please take appropriate precaution
Hello,
It is any time better to have a centralised work place which in our case is your bank account. To avoid GST hassles, it is better if you make them deposit all the cheques into your bank account and then issue them a cheque for their share of comission with/ without GST to avoid any GST related hassles.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Hi,
It is advisable to take the money directly into your bank account, rather than in the accounts of the agents.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LLB
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