GST on Commission Agents: SAC 9966, Registration and RCM

Commission is one of the most misread heads of income under GST, partly because agents rarely think of themselves as "suppliers of a service" and partly because the same word covers wildly different arrangements: a property broker, an insurance agent, a mutual fund distributor, and a purchasing agent for a trading house are all earning commission, yet the GST treatment of each differs on charge mechanism, registration trigger, and invoicing. What ties them together is a single principle: a commission agent supplies a service of arranging or facilitating a transaction, and that service is taxed at 18%, even though the goods or the policy or the units passing through are not the agent's to sell.

This guide works through the mechanics head by head, with the exact SAC codes, the registration thresholds, the reverse-charge position, and worked numbers so you can see how the tax actually lands on a real commission cheque.

What Is a Commission Agent Under GST?

The GST law draws a sharp line between an agent and a trader. A trader buys goods, takes title, and resells them; the entire sale value is his taxable turnover. A commission agent does something narrower. He brings a buyer and a seller together, or arranges a supply on behalf of a principal, and is paid a commission for that facilitation. He never becomes the owner of the goods.

This distinction matters because of Rule 33 of the CGST Rules, 2017, which deals with a "pure agent". Where an agent merely arranges the supply and the consideration for the underlying goods flows to the principal, the agent's taxable value is only the commission he retains, not the gross value of the goods moving through the transaction. So a commodity broker who facilitates a Rs 50 lakh sale and keeps Rs 50,000 as commission is taxed on Rs 50,000, not on Rs 50 lakh. Getting this wrong, by treating the pass-through value as turnover, is the single most expensive error in agency GST.

There is a second category the law is careful about. Under Schedule I of the CGST Act, an agent who supplies or receives goods on behalf of the principal can be treated as making a supply in his own right in certain del credere or stock-transfer situations. That is a specialised position. For the ordinary commission agent who only facilitates and never handles title or stock, Rule 33 governs and only the commission is taxed.

SAC Codes and the 18% Rate

Every service under GST carries a Service Accounting Code (SAC), and using the right one on your invoice is what defends your rate if a query is ever raised. For commission and brokerage there are two codes that cover almost every case.

Tax Rate Chart

GST on Commission & Brokerage: SAC and Rate

Commission is a service. It is taxed at 18% regardless of what the underlying goods, policy, or security is. Only the commission earned is the taxable value under Rule 33.

Buying & Selling Agent Services (SAC 9966)

9% CGST + 9% SGST intra-state, or 18% IGST inter-state

18%

Financial Intermediary Services (SAC 9971)

Insurance agents, MF distributors, stock brokers

18%

Taxable Value (Rule 33)

Not the gross value of the goods or policy

Commission only

Registration Threshold

Rs 10 lakh in special-category states; nil for inter-state

Rs 20 lakh

Source: Notification No. 11/2017-Central Tax (Rate); Rule 33 CGST Rules, 2017; SAC Scheme of Classification of Services

SAC 9966 covers "services of commission agents, commodity brokers, and auctioneers and all other traders" in the buying and selling of goods. This is your general trading, commodity, and goods-agency code.

SAC 9971 covers financial and related services. Insurance agent commission, mutual fund distribution, and stock-broking commission sit in this financial-services family. The rate is the same 18% either way, so the choice of code is about correct classification and clean records rather than a different tax outcome.

There is no lower slab for commission. It is 18% across the board. The abolition of the old 28% goods slab and the move to a 0/5/18/40% structure did not touch the services rate: commission and brokerage remain at 18%.

When Must a Commission Agent Register?

Two triggers matter, and the second one surprises people.

Turnover threshold. A commission agent must register once his aggregate turnover of commission income crosses Rs 20 lakh in a financial year (Rs 10 lakh in the special-category states). Aggregate turnover here means the commission earned, computed on the Rule 33 basis, not the value of the goods facilitated.

Inter-state supply. This is the trap. Under Section 24 of the CGST Act, any person making an inter-state taxable supply of services must register from the very first rupee, with no threshold benefit. A commission agent sitting in Hyderabad who earns brokerage from a principal located in Maharashtra is making an inter-state supply of service, and is therefore liable to register even if his total commission for the year is only Rs 4 lakh. Many small agents miss this entirely because they assume the Rs 20 lakh floor protects them. It does not once a single inter-state commission invoice is raised.

For the mechanics of getting registered, the documents needed, and the ARN process, see our detailed walkthrough on the GST registration process.

Insurance Agents and Reverse Charge

The insurance sector is where the charge mechanism flips, and it flips based on whether the agent is registered.

Under Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017, services supplied by an insurance agent to any person carrying on insurance business are covered by the Reverse Charge Mechanism (RCM). In plain terms, when an insurance agent is not registered under GST, the insurance company pays the GST on the commission under reverse charge and deposits it directly with the government. The agent raises no tax invoice and collects no GST.

If the agent is registered under GST (for example, because his commission has crossed Rs 20 lakh, or because he earns commission from multiple lines and elects to register), the position changes: forward charge applies, the agent issues a GST invoice, charges 18%, and pays it himself.

This design is deliberate. The vast majority of insurance agents are small, individual LIC or general-insurance agents whose commission is below the threshold. Rather than force lakhs of small agents into registration and monthly returns, the law puts the compliance burden on the insurer, which is already a large, registered taxpayer well equipped to deposit the tax. The agent stays outside the GST net until he genuinely grows past the threshold.

Worked example: unregistered insurance agent

Take an individual life-insurance agent who earns Rs 8 lakh in commission during the year, all from a single insurer.

• His commission is below Rs 20 lakh, so he is not required to register.
• Under Notification No. 13/2017, the insurer pays 18% GST under RCM on his commission: Rs 8,00,000 x 18% = Rs 1,44,000, deposited by the insurer, not the agent.
• The agent receives his commission with income-tax TDS under Section 194D deducted separately; the GST piece never touches his hands.

Note that the insurer's RCM liability and the agent's income-tax TDS are two entirely different obligations on the same commission. They do not net against each other.

Mutual Fund Distributors

Mutual fund distributors earn two kinds of commission: an upfront brokerage and, more importantly, trail commission paid by the Asset Management Company (AMC) for as long as the investor stays invested. Both are subject to 18% GST as a financial intermediary service under the SAC 9971 family.

The charge mechanism here is forward charge, but the AMC settles it. In practice the AMC files the GST on the distributor's commission and accounts for it, so a registered distributor's trail flows net of the tax already handled at the AMC end. A distributor whose commission crosses the registration threshold must register, issue invoices to the AMC, and file returns; the AMC then claims input tax credit on the GST it bears.

Worked example: distributor trail commission

A mutual fund distributor earns Rs 25 lakh in trail commission across several AMCs in the year.

• Because commission exceeds Rs 20 lakh, the distributor must be registered.
• GST at 18% on Rs 25,00,000 = Rs 4,50,000, accounted for on the commission under forward charge.
• The distributor can now claim input tax credit on his own business inputs: CRM and portfolio software subscriptions, office rent, professional fees, and staff-related taxable services.

We cover the distributor position in more depth in our dedicated note on GST for mutual fund distributors.

Real Estate Agents and Brokers

A property broker earns brokerage for arranging a sale or a lease. That brokerage is a service taxed at 18% under SAC 9966. The critical point for real estate is what is not part of the taxable value.

Stamp duty and registration charges are not subject to GST. They are a state levy on the conveyance of immovable property, collected by the buyer directly to the state, and they never form part of the broker's commission or the broker's taxable value. A broker who wrongly grosses up his invoice with the stamp duty passing through the deal inflates his own GST liability for no reason.

Worked example: broker on a Rs 1 crore sale

A property broker facilitates the sale of a flat for Rs 1 crore and charges the standard 1% brokerage, i.e. Rs 1,00,000.

• Taxable value under Rule 33 is the commission of Rs 1,00,000, not the Rs 1 crore sale value.
• GST at 18% = Rs 18,000, charged on the invoice to the client.
• The stamp duty and registration fee the buyer pays to the state (often several lakhs) are outside GST entirely and do not enter the broker's return.

If the broker's total brokerage for the year is below Rs 20 lakh and he operates only within his state, he need not register. The moment he earns brokerage from a client or principal in another state, Section 24 pulls him into registration from the first invoice.

Stock Brokers

A stock broker's bill to a client bundles several charges, and the GST treatment is uniform across the taxable components. Brokerage, SEBI turnover fees, and exchange transaction charges all attract 18% GST. These are consideration for the broking service and sit in the financial-services SAC 9971 family.

What is not part of the GST-bearing value are the statutory levies that are pure pass-throughs, principally the Securities Transaction Tax (STT) and stamp duty, which are government levies collected on the trade and are not the broker's service consideration. So on a contract note you will see GST computed on brokerage plus SEBI and exchange charges, while STT and stamp duty sit outside the GST base. Stock brokers are large registered entities operating on forward charge, so the client simply bears the 18% on the taxable components.

ITC for Commission Agents

Once a commission agent is registered and charging (or bearing) GST, he is entitled to input tax credit on his business inputs, subject to the usual Section 16 conditions and the Section 17 5) blocks.

What a commission agent can normally claim ITC on:

• Office rent and utilities used for the agency business
• CRM, trading, portfolio, or lead-management software subscriptions
• Professional fees (accounting, legal, GST return filing)
• Marketing, advertising, and lead-generation services
• Business telephone and internet

What is blocked:

• GST on a personal motor vehicle is blocked under Section 17 5). A car bought in the agent's name for personal use does not become creditable merely because he also drives it to client meetings.
• Food, beverages, and club memberships remain blocked.

The eligibility conditions, the GSTR TwoB matching requirement, and the common reasons credit gets denied are set out in our guide to GST input tax credit eligibility. The same discipline that applies to any professional applies here; our note on GST on professional services walks through the forward-charge and ITC logic in parallel.

Invoice Requirements

A registered commission agent must issue a tax invoice for his commission. He has two acceptable rhythms:

• Per transaction, raising an invoice each time a deal closes and commission crystallises, or
• Monthly, aggregating the commission earned in the month into a single invoice, which is the practical norm for high-volume agents such as distributors and brokers whose commission accrues continuously.

The invoice must carry the agent's GSTIN, the recipient's GSTIN (the principal, insurer, or AMC), the SAC 9966 or 9971), the taxable value (the commission only), the applicable CGST and SGST or IGST, and the invoice number and date. Where the arrangement is on reverse charge (an unregistered insurance agent), no tax invoice is raised by the agent at all; the recipient generates a self-invoice and pays under RCM.

Charge Mechanism at a Glance

The pattern is clear once you separate the two variables. The rate never moves from 18% and the taxable value is always the commission alone under Rule 33. What changes is only who pays: the default is forward charge by the agent, and the one significant exception is the unregistered insurance agent, where the insurer picks up the tax under reverse charge.

Frequently Asked Questions

What is the GST rate on commission and brokerage in India?

Commission and brokerage are taxed at 18% GST 9% CGST plus 9% SGST for intra-state, or 18% IGST for inter-state). This applies to buying and selling agents under SAC 9966 and to financial intermediaries such as insurance agents, mutual fund distributors, and stock brokers under SAC 9971. Only the commission earned is taxed, not the value of the underlying goods, policy, or security, as provided in Rule 33 of the CGST Rules.

What SAC code should a commission agent use?

A commission agent or commodity broker dealing in goods uses SAC 9966 (services of commission agents, commodity brokers, and auctioneers). Financial intermediary services, including insurance agent commission, mutual fund distribution, and stock broking, fall under the SAC 9971 financial-services family. Both attract 18% GST, so the choice is about correct classification on the invoice rather than a different tax rate.

When must a commission agent register for GST?

Registration is mandatory once commission turnover crosses Rs 20 lakh in a financial year (Rs 10 lakh in special-category states). Crucially, under Section 24 of the CGST Act, any inter-state supply of commission service requires registration from the very first rupee with no threshold benefit. So an agent earning commission from a principal in another state must register even if total commission is well below Rs 20 lakh.

Is GST on insurance agent commission paid under reverse charge?

Yes, when the insurance agent is unregistered. Under Notification No. 13/2017-Central Tax (Rate), services by an insurance agent to an insurer are on reverse charge, so the insurance company pays the 18% GST directly to the government and the agent raises no tax invoice. If the agent is registered under GST, forward charge applies instead: the agent issues an invoice, charges 18%, and pays the tax.

Do mutual fund distributors and stock brokers pay GST on commission?

Yes. Both are on forward charge at 18%. For mutual fund distributors, the AMC accounts for the GST on upfront and trail commission and can claim it as input tax credit. Stock brokers charge 18% on brokerage, SEBI turnover fees, and exchange transaction charges; statutory levies such as STT and stamp duty sit outside the GST base as pure pass-throughs.

Can a commission agent claim input tax credit?

A registered commission agent can claim ITC on genuine business inputs: office rent, software subscriptions, professional fees, advertising, and business communication, subject to the Section 16 conditions and GSTR TwoB matching. ITC on a personal motor vehicle is blocked under Section 17 5), as are food, beverages, and club memberships. Credit is available only where the input is used for the taxable agency business.

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This guide is based on the Central Goods and Services Tax Act, 2017, and the CGST Rules, 2017, specifically Rule 33 (value of supply where an agent acts on behalf of a principal), Section 22 and Section 24 (registration and the compulsory registration of inter-state suppliers), and Section 17 5) (blocked input tax credit). The reverse charge on insurance agent commission is governed by Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017. Rate and classification references rely on Notification No. 11/2017-Central Tax (Rate) and the Scheme of Classification of Services, under which buying and selling agents fall in SAC 9966 and financial intermediary services in SAC 9971, both at 18%. Thresholds, notifications, and specific charge mechanisms should be confirmed against the latest position at cbic-gst.gov.in before applying them to a particular transaction.