GST Applicability on Referral Gift Amount

My query is around applicability of GST on a referral transaction.

Company A referred us a Client. As a good will gesture, we are rewarding the Company A with a referral gift amount. There is no transaction that has taken place between Company A and us, neither has Company A done any work for the client on behalf of us, so the concept of commission doesn't apply here as per my understanding.

This is something we are just gifting the company A when there is no work actually carried out between us and them. Is GST applicable on this amount we are paying them? And does company A need to raise an invoice when no work is done?

To add some context, we are part of other referral schemes we have joined as well. As an example, payment gateways like instamojo, razorpay etc. pay us referral amounts every now and then without we raising any invoices. These are for referrals we have made to them where the customers register with them. How are these being paid without GST being applied?

As per my understanding, what you are paying is basically Fees, which is in the nature of commission to company A to bring in new client.

Even there is no agreement between you two, there is a transaction taking place. you are paying consideration for services provided by company A in the form of referring new clients. Moreover you are paying in course and furtherance of your business. which, as per me is very well covered with in the definition of supply in GST. The said nature of service is neither included in negative list (Schedule III) nor exempted from tax as per CGST act.

Also same is not covered under reverse charge mechanism.

Now, you need to check, whether the Company A is registered under GST or not, because most of the time such fees are paid to individuals who are not registered (just like google pay user, razorpay user, etc). if such is the case then the service provider will not be required to raise any GST invoice,

Please also specify, whether this Gift is in form of Money or Kind.

If this is in Kind, then any gst paid on the purchase of the item will be ineligible for ITC.