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WHETHER COMMISSION ON RBI BOND IS TAXABLE IN THE HANDS OF SERVICE PROVIDER OR UNDER RCM BY BANK

Ankush (article) (25 Points)

11 March 2021

Facts : Mrs. Nirmala is Facilitator/ Registered Person with State Bank of India to distribute Bonds Issued by Reserve Bank of India . Role of Mrs. Nirmala is to acquire new clients and get the applications processed for RBI Taxable / Taxfree Bonds at SBI Office only. For this commission is being paid by Bank and not charged to customer .

Query : Whether GST is applicable on Mrs.Nirmala for Commission paid by bank for facilitating the RBI Bond Business for the Bank as per Circular No.86/05/2019-GST ?

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4 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 11 March 2021

GST at 18% is applicable to all taxable value of supply provided by an agent, 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:

Bank
Financial institution

mrs Nirmala is dealing with commercial transactions and gst @ 18% is applicable

https://cleartax.in/s/gst-on-commission-brokerage

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 14 March 2021

In term of Notification 29/2018 CT your services cover under RCM .

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 15 March 2021

That was hard to interpret from the circular. So brokerage by agent from customer became RCM then?

Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 16 March 2021

Dear yasaswi

in term Circular 86/5/2019 GST

Banking company is the service provider in the BC Model operated as per RBI Guidelines. The banking company is liable to pay GST on the entire value of service charged received from the customer irrespective of the same is availed by BC/BF.
Hence the Services being provided by BC to Customer on behalf of bank the GST is paid by Bank (RCM).

Note : Services provided in rural area it's being Exempted under Notification 12/2017 CT (r)

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