GST Rules for Insurance Agents

Insurance agents earn commission from insurance companies. The main questions are:

• Do agents need to take GST registration?
• Who pays GST on commission?
• What happens if agents also have other service income?

Let’s break this down.

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🔹 Key Provisions

1. Section 22, CGST Act, 2017
   • Registration required if turnover > ₹20 lakh (₹10 lakh in special category states).
2. Section 23, CGST Act
   • If a person supplies only exempt goods/services → No registration needed.
3. Notification No. 5/2017 – CT
   • If a person supplies only services where GST is payable under Reverse Charge (RCM) → No GST registration required.
4. Notification No. 13/2017 – CT (Rate)
   • Insurance company pays GST under RCM on commission paid to agents.
   • So, agent never pays GST on commission.

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🔹 Practical Examples in Table Form

Example	Commission Income	Other Service Income	Total Turnover	GST on Commission?	GST Registration Required?	GST on Other Income?
1	5,00,000	–	5,00,000	❌ (Insurance Co. pays under RCM)	❌ (below ₹20L)	–
2	21,00,000	–	21,00,000	❌ (Insurance Co. pays under RCM)	❌ (covered under Notif. 5/2017)	–
3	5,00,000	14,00,000	19,00,000	❌	❌ (below ₹20L)	❌
4	5,00,000	16,00,000	21,00,000	❌	✅ (turnover > ₹20L, and has other taxable services)	✅ (only on other income)
5	21,00,000	2,00,000	23,00,000	❌	✅	✅ (only on other income)
6	21,00,000	21,00,000	42,00,000	❌	✅	✅ (only on other income)

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🔹 Case-by-Case Explanation

✅ Example 1

• Commission = ₹5 lakh
• Turnover < ₹20 lakh → No registration required.
• Insurance Co. pays GST under RCM → Agent not liable.

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✅ Example 2

• Commission = ₹21 lakh
• Turnover > ₹20 lakh, but all income is commission.
• Covered under Notification 5/2017 → No registration needed.
• GST on commission still paid by Insurance Co. under RCM.

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✅ Example 3

• Commission = ₹5 lakh, Other services = ₹14 lakh
• Total turnover = ₹19 lakh (< ₹20 lakh).
• No registration required.
• No GST on other services (because turnover < ₹20 lakh).

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✅ Example 4

• Commission = ₹5 lakh, Other services = ₹16 lakh
• Total = ₹21 lakh (> ₹20 lakh).
• Now registration compulsory.
• Agent does not pay GST on commission (Insurance Co. pays under RCM).
• Agent must charge GST on other taxable services.

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✅ Example 5

• Commission = ₹21 lakh, Other = ₹2 lakh → Total = ₹23 lakh.
• Since other taxable income exists, exemption under Notif. 5/2017 not available.
• Must register under GST.
• GST payable only on other services (not on commission).

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✅ Example 6

• Commission = ₹21 lakh, Other = ₹21 lakh → Total = ₹42 lakh.
• Registration mandatory.
• GST payable only on other services, not on commission.

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🔹 Special Notes

• Insurance commission is always covered under RCM → Insurance company pays GST.
• Insurance agent never pays GST on commission, even if registered.
• If agent has only commission income → No registration needed (thanks to Notif. 5/2017).
• If agent has other taxable income + turnover > ₹20 lakh → GST registration is compulsory, and GST is payable only on that other income.

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👉 In short:

• Only commission income? No GST registration needed, no GST liability.
• Commission + other taxable income? If turnover > ₹20 lakh → GST registration required, GST payable on other services only

GST Decision Tree for Insurance Agents

Step 1: Check the Nature of Income

• Only Insurance Commission? → Go to Step 2
• Insurance Commission + Other Taxable Services? → Go to Step 4

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Step 2: Only Insurance Commission Income

👉 Who pays GST? Insurance Company (under RCM)

• Turnover < ₹20 lakh → ❌ No GST registration required
• Turnover > ₹20 lakh → ❌ No GST registration required (because of Notification 5/2017 – CT)

✅ Final Answer: Agent never pays GST on commission & never needs registration if only commission income.

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Step 3: End (Only Commission Case)

📌 Agent is not liable for GST in any case.

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Step 4: Commission + Other Taxable Services

👉 Example: Commission + Consultancy, Rent, Freelance Work, etc.

• Total Turnover < ₹20 lakh → ❌ No GST registration required
• Total Turnover > ₹20 lakh → ✅ GST registration compulsory

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Step 5: GST Liability in Mixed Income Case

• On Commission: Insurance Company pays under RCM (Agent not liable).
• On Other Services: Agent must charge & pay GST (if turnover > ₹20 lakh).

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🖼️ Flowchart (Text Representation)

Start
  |
  |-- Do you earn only insurance commission?
  |        |
  |        |-- YES --> Is turnover > ₹20 lakh?
  |        |         |-- YES --> No registration (Noti. 5/2017), GST paid by Insurance Co.
  |        |         |-- NO  --> No registration, GST paid by Insurance Co.
  |        |
  |        |-- NO --> (You also have other taxable services)
  |                  |
  |                  |-- Is total turnover > ₹20 lakh?
  |                            |
  |                            |-- YES --> Registration required.
  |                            |          GST on other services (not on commission).
  |                            |
  |                            |-- NO  --> No registration required.
  |                                       No GST on other services.

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👉 In very simple words:

• Only Commission = Relax, no GST headache (company pays under RCM).
• Commission + Other Services
  • Below ₹20 lakh = No GST.
  • Above ₹20 lakh = Register & pay GST only on other services.