Earning though doing online CreditCard Transaction for others

[rahul gupta]

Hi,

With my credit cards I do online transactions for one person and in return I charge 2% as my commision on that transaction amount.
That person pays the transaction amount and the commision amount directly to my credit card (online transfer).

He use my credit cards to grab the offers generally run by various e-commerce websites. On average the credit card usage will be 3-4 lakh per month. Approx 50 lakh in a year.

My question is:

1. Is earning through the commision in this way comes under GST ? If yes then how much percent it will be ?

2. If it doesn't fall under GST, then do I need to have any legal contract between us, specifing in details that I just charge the commision on that transaction amount, as I don't know for what purpose he is doing such a bulk purchasing.

Also to specify, he does not hold any GST number ( he is unregistered user).

Please guide me. I don't have any issue in paying tax on earnings and want to do all the thing legally so that I can't get scrutiny by IncomeTax.

-Thanks
Rahul

[Kishan Barai]

It seems that you do not possess any company then I would say you should get a GST at first because its a supply of services and you crossed 20 Lakh a year mark. You need to charge the 18% for your services provided.

So if you charge 2% for credit card transaction for the third party then.

Your invoice for 1,00,000 card swipe would be 2000 INR. Then you need to charge 2000 + 18% GST [360] = 2360 INR

or

Suppose you have fixed the price of 2000 INR. Then in bill you need to show 1694.91 INR + 18% GST [305.08] = 2000 INR

Moreover, you also need to file an income tax return based on a latest slab at present.

Income up to ₹ 2,50,000*	No tax	No Cess
Income from ₹ 2,50,000 – ₹ 5,00,000	5%	4% Health and Education Cess of IT
Income from ₹ 5,00,000 – 10,00,000	20%	4% Health and Education Cess of IT
Income more than ₹ 10,00,000	30%	4% Health and Education Cess of IT

Surcharge: 10% of income tax, where total income exceeds ₹ 50 lakh up to ₹ 1 crore.

You must visit your nearest CA or Accountant

[rahul gupta]

Thanks Kishan Sir, for your quick reply.

Can you also guide on: Do I need to have any legal contract between us, specifing in details that I just charge the commison on that transaction amount

As I don't know for what purpose he is doing such a bulk purchasing. Might be he is doing such a bulk purchasing because of some illegal things. So if any investigation happen and they find out that payment was done by my credit card, and investing team comes to me, then I will have that legal contract to show. Am I thinking correct?

[Kishan Barai]

You crosses the thrash hold limit of AGGREGATE TURNOVER of 20 lacks. So GST is required

It might be possible that he might be using your card for illegal purchase or to show more his sales & get better ranking...

Or probably using pay per clikc ads to sell something fake. So you must always have an legal contract with them.

For it you need to approach an Lawyer.

[DR.MARIAPPAN GOVINDARAJAN]

Sri Kishan gave a detailed reply and solution.

[Kishan Barai]

Thank you sir

AI Summary

GST on commission for facilitating credit card purchases requires registration and taxation as supply of services when turnover exceeds threshold. Commission earned for processing online credit card transactions is a taxable supply of services; where aggregate turnover exceeds the registration threshold the intermediary must obtain GST registration and charge GST on the commission, invoice either by adding GST or showing net commission plus GST, and declare the income for income tax purposes. The arrangement should be documented by a legal contract and appropriate professional advice sought to manage compliance and investigatory risks.