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One of our readers wrote to us with this query:
I am an MFD. I also distribute life and general insurance policies. Last financial year, my income exceeded the threshold limit of Rs.20 lakh if I include both – Rs.13 lakh from mutual funds and Rs.8 lakh from insurance. Please advise if I need to obtain GST registration and pay GST. Also, do I need to pay GST on both the commission income – mutual funds and insurance.
Jiju, Kerala
You will be required to obtain GST registration number within 30 days of reaching the threshold limit of Rs.20 lakh income. Here income is commission earned from all financial products like mutual funds, insurance, p2p lending and so on.
On payment of GST, remember that insurance commission is subject to GST from Re.1. There is no exemption or threshold limit like Rs.20 lakh in mutual funds for insurance agents.
Currently, insurance companies follow reverse charge mechanism (RCM) on commission of up to Rs.20 lakh i.e. they pay GST from your commission income along with TDS before disbursing the net commission. Such a practice differs with insurers.
While some companies follow RCM for commission of over Rs.20 lakh, a few companies disburse gross commission after deducting TDS to insurance agents. In this case, agents are liable to pay GST on commission on their own.
In your case, you earn less than Rs.20 lakh from insurance and have already paid GST on commission income from insurance policies due to implementation of RCM. Hence, you need to pay GST only on commission income obtained from mutual funds.
Since you are obtaining GST registration for the first-time post reaching the threshold limit of Rs.20 lakh, you will be required to pay GST only on the incremental income in the first year. In your case, you will have to pay GST only on Rs.1 lakh.
In the subsequent years, you will have to pay GST on entire mutual fund commission income.
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.
