Commission received from Life Insurance Corporation Of India

[MAHTAB KHAN]

Whether the applicant, who is a registered dealer primarily engaged in the purchase and sale of capital goods and not providing any services as a regular business activity, is liable to pay GST on the commission income received from Life Insurance Corporation (LIC) of India, which has been duly recorded in the Profit & Loss Account as other income?

[Sadanand Bulbule]

In terms of Notification No. 13/2017-CTR dated 28/06/2017 vide Entry No.7, GST is payable by the Insurance Company under RCM on the services proivded by the insurance agent to it. So you need not pay GST on commission amount earned even if it exceeds Rs.20 Lakhs.

[Sooraj B]

To add on to what Sadanand Sir, has replied, services liable for RCM in the hands of the recipient shall be treated as exempted supplies for the purpose of Section 17(2) of the CGST/SGST Act; accordingly if any common ITC is availed, such ITC shall be reversed proportionately .in accordance with Rule 42/43 of the CGST /SGST Rules .

AI Summary

Reverse charge mechanism: insurance companies, not agents, must pay GST on agent commissions; input tax credit reversal rules apply. Commission received by an insurance agent is taxed under the reverse charge mechanism, making the insurance company liable to pay GST on the agency services; the agent is not required to remit GST on that commission. Supplies on which the recipient is liable under reverse charge are treated as exempt for input tax credit purposes, requiring proportionate reversal or apportionment of any common ITC in line with the applicable ITC apportionment rules.