Commission agents who work with foreign principals face one of the trickier corners of India's
GST law. The tax outcome depends on the supplier and recipient's locations, whether the agent
is acting on their own account or as a pure agent and whether the place of supply falls within or
outside India. Understanding these rules clearly can help avoid costly mistakes and future
disputes.
Who are commission agents under GST?
Under the Goods and Services Tax (GST), a commission agent is a person or entity that acts as
an intermediary between a buyer and a seller or between principals. They facilitate the sale or
purchase of goods or services and earn a commission or brokerage for doing so. The GST law
recognises commission agents, along with brokers, auctioneers, del-credere agents and other
mercantile agents as agents under its definition of supply of services.
When do services provided to foreign principals qualify as
“export of services”?
A supply of services counts as an export under section 2(6) of the Integrated Goods and
Services Tax (IGST) Act, 2017, only if all of the following conditions are met:
- The supplier must be located in India.
- The recipient must be located outside India.
- The place of supply must be outside India. Place of supply is determined under Sections
12 and 13 of the IGST Act. - Payment for such service has been received in convertible foreign exchange or in Indian
rupees, wherever permitted by the Reserve Bank of India (RBI). - The supplier and recipient must not be merely different establishments of the same
entity. That means they must be independent parties.
Further, under Section 16 of the IGST Act, export of services is treated as a “zero-rated supply”,
meaning the supplier can either:
- Export without payment of IGST under LUT/Bond and claim refund of unutilised input tax
credit (ITC), or - Export on payment of IGST and claim a refund of the tax paid.
How is the place of supply determined for commission
agents?
For cross-border services, the place of supply is governed by Section 13 of the IGST Act.
Intermediary services (current legal position)
Under Section 13(8)(b), the place of supply of intermediary services is the location of the
supplier. This means:
- If an Indian commission agent qualifies as an intermediary,
- And the supplier is located in India,
- The place of supply will be India,
- Even if the foreign principal is located outside India.
In such cases, the supply does not qualify as an export, and GST is payable in India.
Proposed amendment under Finance Bill 2026
The Finance Bill, 2026, proposes to omit Section 13(8)(b), which currently fixes the place of
supply of intermediary services as the supplier’s location. Once this amendment is enacted and
notified, intermediary services will follow the general rule under Section 13(2), i.e., the place of
supply will be the recipient’s location.
However, GST amendments take effect only upon notification by the Government. Therefore,
until the omission is officially notified and brought into force, Section 13(8)(b) continues to apply.
When are services treated as zero-rated exports?
Where all the conditions under Section 2(6) are satisfied, the supply qualifies as an export and
is treated as zero-rated under Section 16.
If the commission agent supplies services on a principal-to-principal basis, it means they are not
merely arranging or negotiating a deal. Instead, they contract in their own name on behalf of an
overseas recipient. Here, the supply qualifies as an export when payment is made in convertible
foreign exchange.
On the other hand, if the payment is received in Indian rupees, or the place of supply is held to
be in India, for example, the service is performed in India, or the contract terms show delivery in
India, GST cannot be avoided by labelling the recipient as ‘foreign’.
What are the compliance requirements for commission
agents?
If you are a commission agent offering services to foreign principals, here are a few things to
keep in mind:
- Issue a tax invoice with the supplier name, GSTIN, invoice number, description, value,
tax rate, tax amount and place of supply in line with Section 31 and Rule 46
requirements. Keep original copies and serial control. - Keep a written agreement with the foreign principal stating the scope, commission basis,
responsibilities, payment terms and authorisation evidence for acting on the principal's
behalf. Keep signed copies for audits. - Retain any bills or statements from the foreign principal, along with supporting
documents such as contracts, shipping or service confirmations, to prove the pass-
through or reimbursement nature of the transaction. - Classify your service correctly as a commission or intermediary service and determine
the place of supply to confirm taxability and whether Indian GST applies. - If facilitating exports without payment of integrated tax, furnish a Letter of Undertaking
(LUT) on the GST portal before export; otherwise, execute a bond as prescribed. - File Form GST RFD-11 only for furnishing a Letter of Undertaking (LUT) and retain the
Application Reference Number (ARN) receipt. If you export goods or services on
payment of IGST, you must claim the refund using Form GST RFD-01.
Conclusion
If you act as a commission agent for overseas principals, review how your services are
classified under GST. Instead of assuming they qualify as exports, carefully go through your
contracts, confirm the place of supply and track foreign exchange receipts. For now, as long as
Section 13(8)(b) remains in force, comply with the existing rules and collect GST where
necessary. File your LUT in advance if exporting without IGST, and keep proper records to
avoid disputes, interest or penalties.
Using a reliable system like TallyPrime can make it much easier to manage export invoices,
correctly track GST treatment, and stay fully compliant without last-minute stress.
