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GST on Commission to Insurance Agents

I M Virani (N.A.) (97 Points)

14 March 2019

Insurance company deducted GST while making payment of commission to its agent (i.e. on reverse charge mechanism).

The turnover of the insurance agent does not exceed ₹ 20 lakh in F.Y. 2018-19. How can he claim refund of such GST deducted from his gross commission received from the insurance company?

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3 Replies

prasad Nilugal ( GST Practitioner & Accounts ) (14801 Points)
Replied 14 March 2019

Registration under GST is compulsory for ( commission )agents irrespective of the turnover under section 24 sub section (vii) of the CGST act 2017 .

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I M Virani (N.A.) (97 Points)
Replied 15 March 2019

But don't you think the insurance company would be getting double benefit:

i) it has deducted GST amount from the gross commission payable and not over and above the commission amount

ii) also it would be claiming ITC of such GST amount paid

Say for example:
•Gross commission payable ₹ 100
•GST on above ₹ 18
•Net commission paid to agent ₹ 82 (100-18) and GST deposited ₹ 18
•So net outlay of funds of the company is only ₹ 100 as against the case where suppose the agent raised a bill of ₹ 118 (100+18) and the company would have to pay ₹ 118 (100 to agent and 18 to Govt. on reverse charge).
•In both the cases company would claim ITC of ₹ 18 but outlay of total funds would be only ₹ 100 in the first case and ₹ 118 in the second one.