GST on Commission in India

Working out the GST on commission

Commission is taxed at a flat 18%, so the arithmetic is straightforward. Multiply the taxable value by 18 percent to get the GST, then add it to the base price for the total.

• For an intra-state sale, the 18% splits into 9% CGST and 9% SGST.
• For an inter-state sale, a single 18% IGST applies instead.
• The calculator on this page is pre-set to the 18% rate and handles both cases.

A worked example

Suppose a commission payment has a taxable value of ₹50,000 before tax. Applying 18% GST works out as follows.

The registration rule that catches agents out

Start here, because it is the thing most commission earners get wrong. Section 24(vii) of the CGST Act requires a person who supplies goods or services on behalf of another to register compulsorily, irrespective of turnover. The ₹20 lakh threshold in Section 22 simply does not apply to an agent. So someone earning ₹5 lakh a year in commission, who would be nowhere near the threshold as an ordinary service provider, still needs to be registered. Whether you fall inside this depends on whether you are genuinely acting as an agent under the Act's definition, which covers brokers, commission agents, arhatias, del credere agents and auctioneers.

Commission rates by type

Nearly all commission and brokerage sits at 18%. There is no single code covering every kind, so the classification follows the nature of the underlying service.

Insurance agents do not charge the tax themselves

Insurance commission runs on reverse charge: the insurance company pays the GST directly rather than the agent charging it. The agent does not raise a tax invoice with 18% on it. This survived the September 2025 reform that made individual life and health premiums exempt, because the exemption attached to the premium, not to the commission chain. So an agent selling an exempt policy still generates taxable commission, and the insurer still accounts for the GST on it under RCM.

Export commission to a foreign agent

An Indian exporter paying commission to a foreign commission agent does not pay Indian GST on it. The place of supply is outside India, and the reverse charge provisions do not reach it. This is worth knowing for anyone in export trade, since the instinct is to assume RCM applies to every foreign payment. Documentation still matters: keep the agency agreement and the remittance trail clean.

Reimbursements are not commission

Agents routinely pay costs on behalf of a principal and recover them. Under the pure agent rule in Rule 33 of the CGST Rules, genuine reimbursements can be excluded from the taxable value, so GST applies to your commission rather than to the money that merely passed through you. The conditions are strict: you must be acting on the principal's authorisation, the payment must be separately shown on the invoice, and you must recover only the actual amount. Bundle a reimbursement into your commission line and the whole amount becomes taxable.

Invoicing and credit

An agent's invoice should carry the correct service code, a clear description of what the commission was for, the taxable value and the GST amount. The principal records it as an expense and claims input tax credit where the normal conditions are met, so a sloppy invoice costs your client money and tends to come back to you. Agents can claim ITC on their own business purchases in the usual way. Getting the sub-code wrong rarely changes the rate, since most commission is 18% either way, but a description that does not match the code billed is exactly what triggers a departmental query.

Frequently asked questions