Reverse charge applicablity

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This query is : Resolved

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This discussion clarifies whether IGST reverse charge applies to commission earned in foreign currency from a foreign company for meeting sales targets. The consensus is that reverse charge mechanisms typically apply to expenses incurred by the taxpayer, not income received. Therefore, receiving commission is generally considered income under forward charge, and the intermediary might need to charge CGST and SGST on their invoice to the foreign company.

CA Ashutosh Khaitan

CA Ashutosh Khaitan (Querist)

12 March 2020 Taxpayer has received commission in $ from Foreign company against meeting the sales target. Taxpayer already has LUT. Do the taxpayer require to pay IGST on reverse charge basis on the payment received?

CA Ankit R Momaya

CA Ankit R Momaya (Expert)

12 March 2020 RCM Liability will arise only on our expenses and not our income.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 March 2020 Here it's forward charge.
The intermediary can charge CGST and SGST on the commission amount in the invoice raised to the foreign company (supplier of goods).

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