One of our readers wrote to us with this query:
I work with a leading national distributor. I have two queries related to applicability of GST on my commission:
- Are sub distributors also exempted from paying GST if their annual income does not exceed Rs.20 lakh
- What if annual income exceeds Rs.20 lakh. Should MFDs apply for GST registration number?
Name withheld on request
Dear MFD,
Thanks for writing to us.
While MFDs are exempted from paying GST if their income does not exceed Rs.20 lakh, sub brokers working with NDs cannot avail this exemption. In sub broking model, MFDs tie up with national distributors who are the main brokers. Since they run large businesses, they generally do not qualify for such an exemption.
Further, NDs pay you brokerage exclusive of GST or net commission after deducting GST. In other words, MFDs working with NDs cannot avail Rs.20 lakh exemption on GST. Instead, sub distributors have to pay GST from commission income of Re.1.
However, MFDs earning over Rs.20 lakh by way of commission from NDs will have to obtain GST registration number. By doing so, they can raise invoice and get gross commission from NDs which is inclusive of GST. By doing this, they may avail benefits of input credits.
Hope we are able to address your query.
Regards,
Team Cafemutual
Please note that Cafemutual has spoken to GST experts at consulting firms, compliance officials at AMCs and chartered accountants to write this report. We intend to clarify your doubts on GST. This does not tantamount to be a tax advice of any nature or a recommendation. Please take advice from a qualified tax advisor for your guidance.
