GST on Dealer Registration Fee?

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A company has changed its practice from collecting a refundable security deposit from dealers to a one-time, non-refundable dealer registration fee. Experts clarify that this registration fee is subject to GST, as it represents payment for a business facility or right, unlike a refundable deposit which is not taxed. The prevailing GST rate, typically 18%, should be applied to these non-refundable fees.

abhijit majumder

abhijit majumder (Querist)
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09 October 2025
Sir
The Company previously when engaged dealer(s) , the dealer(s) have to pay a sum of Rs.50000/- by way of Refundable (Non interest Bearing)Security Deposit which will be refund to dealer after termination of the agreement. This is mentioned in the agreement.
Now the Company instead of such Security Deposit taken the amount(Rs.50000/-) under the head 'One time Dealer Registration Fee'.
My query before the learned expert is whether GST will be applicable on such 'One time Dealer Registration Fee'.
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 October 2025 GST is applicable on a 'One time Dealer Registration Fee' because it is a non-refundable charge, representing consideration for entering into the dealer agreement and enabling the dealer to participate in business dealings with the company. In contrast, a refundable (non-interest bearing) security deposit is not subject to GST at the time of collection, as long as it is purely a security for contract performance and is not adjusted against the supply of goods or services.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 October 2025 When a company charges a refundable security deposit, GST is not leviable, provided the amount is returned on conclusion of the agreement and is not used as consideration for any goods or services.

If the amount, instead of being taken as a refundable security deposit, is now collected as a non-refundable 'One time Dealer Registration Fee,' it is considered a payment for a business facility or right and qualifies as a supply of service under GST law.

GST should be charged at the prevailing rate (typically 18%) on such registration fees because it is not a returnable deposit but a payment for a contractual/business right.

abhijit majumder

abhijit majumder (Querist)
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09 October 2025 Many many thanks to Sir Dhirajlal Rambhia for immediately provide your valuable opinion.
In fact your explanation in very simple manner enlighten me immensely as because I have a very limited study on GST.
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 October 2025 You are welcome.

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