RCM applicability on Commission & professional fees
This query is : Resolved
07 July 2024
Dear All
In what situation GST RCM rule is applicable in case of GST registered party for following type of payments ?
(1) Commission claimed by unregister person or Pvt Ltd company
(2) Professional Fees claimed by unregister person or Pvt Ltd company
In above cases TDS rule applicable ?
Regards
S Mallick
In what situation GST RCM rule is applicable in case of GST registered party for following type of payments ?
(1) Commission claimed by unregister person or Pvt Ltd company
(2) Professional Fees claimed by unregister person or Pvt Ltd company
In above cases TDS rule applicable ?
Regards
S Mallick
20 July 2025
1. Commission Claimed by Unregistered Person or Pvt Ltd Company
If Commission is paid to an unregistered person (individual or company):
RCM applies.
The registered recipient (payer) has to pay GST under Reverse Charge Mechanism (RCM) on commission paid to unregistered suppliers.
This is because the supplier is unregistered and services are taxable.
If Commission is paid to a registered Pvt Ltd company:
No RCM applies.
The supplier (registered Pvt Ltd company) will charge GST on invoice normally.
No reverse charge by the recipient.
2. Professional Fees Claimed by Unregistered Person or Pvt Ltd Company
If Professional Fees are paid to an unregistered person (e.g., individual professional):
RCM applies.
The recipient (registered person) must pay GST under RCM on such professional services if supplier is unregistered.
If Professional Fees are paid to a registered Pvt Ltd company:
No RCM applies.
Supplier will charge GST normally on invoice.
3. TDS Applicability
TDS under GST applies on payments made to registered suppliers only (except for certain specified payments).
Since RCM applies when supplier is unregistered, TDS under GST will generally NOT apply on payments to unregistered persons because they do not charge GST.
However, Income Tax TDS (under Section 194J) may apply on professional fees and commission payments regardless of GST registration.
If Commission is paid to an unregistered person (individual or company):
RCM applies.
The registered recipient (payer) has to pay GST under Reverse Charge Mechanism (RCM) on commission paid to unregistered suppliers.
This is because the supplier is unregistered and services are taxable.
If Commission is paid to a registered Pvt Ltd company:
No RCM applies.
The supplier (registered Pvt Ltd company) will charge GST on invoice normally.
No reverse charge by the recipient.
2. Professional Fees Claimed by Unregistered Person or Pvt Ltd Company
If Professional Fees are paid to an unregistered person (e.g., individual professional):
RCM applies.
The recipient (registered person) must pay GST under RCM on such professional services if supplier is unregistered.
If Professional Fees are paid to a registered Pvt Ltd company:
No RCM applies.
Supplier will charge GST normally on invoice.
3. TDS Applicability
TDS under GST applies on payments made to registered suppliers only (except for certain specified payments).
Since RCM applies when supplier is unregistered, TDS under GST will generally NOT apply on payments to unregistered persons because they do not charge GST.
However, Income Tax TDS (under Section 194J) may apply on professional fees and commission payments regardless of GST registration.
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