RCM ON AGENCY COMMISSION

This query is : Resolved

S. RAVICHANDRAN (Querist)
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29 September 2025 Sir
My client was paid RCM on payment of Foreign Agency Commission GST @ 18% during the month of March 2025. They applied refund on exports without payment of IGST for the said period inlcudes the RCM paid by cash and inputs available in the GSTR-2B. The central authorities issued SCN for the RCM paid not available in the GSTR-2B and restricted the refund deducting the RCM paid. We have submitted the supporting documents regarding the RCM payments. Please let me know any judgements or clarification favouring the assessee. Please clarify

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Based on current legal clarifications and recent case law, authorities have often denied GST refund claims pertaining to RCM paid on foreign agency commission where such credit is not reflected in GSTR-2B, even if tax was paid in cash and supporting documents were submitted. However, there are arguments and tribunal decisions favoring the assessee, especially in the case of genuine export transactions.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 The Uttarakhand Authority for Advance Ruling (AAR) and other expert forums have ruled that overseas commission agent services, where the place of supply is outside India, do not qualify as 'import of services' under Section 2(11) of the IGST Act, and thus are not subject to GST under RCM.

If RCM was still paid erroneously, it may be possible—based on contract terms and facts—to argue for ITC refund, citing genuine business use and supporting documentation, though some authorities may restrict this due to absence in GSTR-2B.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Refund of accumulated ITC on exports without payment of IGST generally requires that ITC be reflected in GSTR-2B for the relevant period. Yet, Circular No.125/Forty four/2019-GST provides some leeway for claims where supporting documents establish genuine payment and utilization for business exports.

CBIC and portal instructions emphasize matching invoice details and correct reporting in GSTR-1 and GSTR-3B. Refunds may be denied if credits are not auto-populated or matched, but documentary evidence (such as bank challans, contracts, and proof of business use) can strengthen appeals against such denial.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Decisions by authorities like Uttarakhand AAR and discussions among GST experts suggest that if the foreign agent is defined as an 'intermediary' and the transaction is structured properly, GST under RCM may not apply. This has occasionally led to favorable adjudications for assessees, especially if the payment was made under a bona fide misunderstanding or as a compliance safeguard.

Some cases (e.g., Midas Foods Pvt Ltd) establish that such payments do not fall under 'import of services', thereby not attracting RCM and thus should not restrict ITC refund on exports.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Good luck..

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