Accounting & GST Applicability

Company X provides a platform for users they can Book cab services & for cab service company X hires cab company y who provides cab services like Meru. Now Company X provides the Cab booking leads to Company Y & Company Y provides cab service to customer & provide Bill to customer. But Payment was received by Company X & then transferred to Company Y.

Q1. Accounting treatment + GST in Books of company X for receiving payment on behalf of company Y?

Q2. accounting treatment + GST of payment by company X for Q1. 

Replies (3)
Quick Summary
This discussion clarifies the accounting and GST treatment for Company X, a cab booking platform that receives payments on behalf of cab service providers (Company Y). It explains that Company X should account for the payment as a liability to Company Y, and then issue its own commission invoice with GST to Company Y. The advice clarifies that this is treated as commission income for Company X, not sales, due to the principal-agent relationship.

Record it as commission or sales, which ever applies. If commission, 

Unfortunately, Commission Income is Taxable too and it is deducted at the source by the person paying the commission. Tax on Commission Income in India Commission Income is Taxed at the rate of 5% of the total amount received as per Section 194 H of the Income Tax Act. 

Now it cannot be sales because principal-agent relationship exists and risks and rewards are not borne by X. 

A1 : The amount received is on behalf on company Y. So Debit bank and credit company Y ( Current liabilities ).

Company Y would generate the invoice to end consumer and received the payment from third party company X

A2 : company X would generate its commission invoice + 18% gst. which would be adjusted and balance amount would be paid by x to y

X WILL BOOK ONLY COMMISSION SALES AMOUNT TO Y

Y WILL BOOK CAR BOOKING SALES TO END CONSUMER
Y WILL BOOK COMMISSION EXPENSE TO X

THERE IS NO SCOPE FOR TDS DEDUCTION IN HANDS OF Y as X has all the money with it. THERE ARE ENOUGH CASE LAWS WHICH WOULD ALLOW COMMISSION EXPENSE DEDUCTION UNDER INCOME RAX LAW EVEN WITHOUT TDS compliance.

Please convey a like to this answer if it was helpful.

I heard they are planning to include taxation transactions into reporting to give more weightage to reporters and it is easy. Then, taxation will consists of tax planning, income tax and corporate tax issue.

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