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RCM on Direct Selling Agents Services / GST on Direct Selling Agents (DSAs) / Direct Selling Agents Services (DSAs)

Who is a Direct Selling Agent (DSA)?

A Direct Selling Agent (DSA) is a person or organization appointed by banks, NBFCs (Non-Banking Financial Companies), or other financial institutions to help them sell their products or services—like loans, credit cards, or insurance—to customers. They work as freelance sales agents and are not employees of the company.

• They are not on the payroll of the bank or NBFC.
• They work under a contract and are usually paid based on performance (commission).
• Since they are not employees, their services are not exempted under Schedule III of the CGST Act, which exempts employer-employee services.

GST Applicability on DSAs

From the beginning of GST law, there was no reverse charge for services by DSAs. This meant that DSAs themselves had to register and pay GST if their income crossed the threshold limit of ₹20 lakhs (₹10 lakhs in special category states).

This caused problems, especially for:

• Individual DSAs
• Small agents who earn low commissions
• Those who lack awareness or resources to comply with GST rules

Relief for Individual DSAs – Reverse Charge Notification

The government recognized the problem and gave relief to individual DSAs by introducing a reverse charge mechanism through:

Notification No. 15/2018 – Central Tax (Rate) dated 26th July 2018

This notification amended an earlier one (Notification No. 13/2017) and made a major change:

Now:

If a bank or NBFC takes services from an individual DSA (not a company or firm), then the bank/NBFC will pay GST under reverse charge. This means:

• DSA doesn’t need to register under GST
• Bank or NBFC pays the GST
• Bank or NBFC can claim ITC (Input Tax Credit) on this GST

But:

If the DSA is a:

• Company (body corporate)
• Partnership firm
• LLP (Limited Liability Partnership)

Then the DSA must register and pay GST under the normal (forward charge) method.

Example: Individual vs. Company DSA

Valuation – On What Amount is GST Charged?

The value of supply (i.e., on what amount GST is paid) is the actual commission received by the DSA.

As per Section 15 of the CGST Act, the value is:

“The price actually paid or payable for the service.”

So, if the DSA earns ₹1,00,000 commission:

• GST (18%) is calculated on ₹1,00,000
• If it’s an individual DSA, bank pays ₹18,000 GST under reverse charge
• If it’s a firm or company, DSA adds ₹18,000 GST in invoice

Important Point: No GST Deduction by Bank

Banks or NBFCs cannot deduct GST from the commission payable to DSAs and pay only the net amount. Instead:

• They must pay full commission to the DSA
• Separately pay GST to the government
• Claim ITC on that amount

This ensures:

• Transparency in billing
• Proper credit flow in the GST system

Conclusion

Understanding GST on DSAs is important for both agents and financial institutions. Here's a quick summary:

If you’re an individual DSA and only provide services to banks or NBFCs:

• No need to register under GST
• GST will be paid by bank/NBFC under reverse charge

If you’re a company or firm working as a DSA:

• You must register under GST if your turnover exceeds ₹20 lakhs
• You must charge GST and file returns regularly

By introducing reverse charge for individuals, the government has simplified GST compliance for small DSAs, helping them focus more on their business rather than tax paperwork.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.