1. Why is GST applicable on agent commissions?

GST is applicable on services provided by agents to foreign universities because these services clearly fall under the definition of ‘intermediary services’.

“Intermediary services” are defined under the IGST Act, 2017 as follows:

“Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.”

In the case of UK universities, agents act as an intermediary by facilitating the supply of services* between the UK university (suppliers of the ‘primary service’ of education) and the prospective students (recipients of the main service).

* Services which include identifying appropriate students using knowledge of the university, and providing dedicated support to applicants throughout the application process, along with other ancillary services.

GST- Goods & service tax in India

2. How does this relate to the ‘place of supply’ argument?

In 2012, the Indian government issued a ‘place of provision’ rule. In 2014 this was clarified to show that in the case of ‘intermediary services’, the ‘place of supply of services’ shall be defined as the location of the service supplier i.e. India. While stakeholders might claim that there was some grey area on applicability prior to the 2014 clarification being issued, the same cannot be said to be the case since the clarification was issued. Sannam S4 is clear that Service Tax should have been applicable on agent commission.

It is worth noting that GST has not changed these principles. As such, it is not correct to say that the introduction of GST has triggered the need for tax to be paid. Tax (in the form of Service Tax) should have been paid since 2014; the introduction of GST increases the tax payable from 15% (previous Service Tax) to 18% (new GST).

3. How can agents raise a GST-compliant invoice when the recipient of the service will not have the GSTIN (as universities are in a non-taxable region)?

A GST-compliant invoice can be raised even when the recipient is in the non-taxable territory. Sub-rule (e) & (f) of rule 46 states that the “name and address of the recipient and the address of delivery, along with the name of the State and its code if such recipient is un-registered” must be included.

4. Several UK universities pay for agents’ work automatically using their accounting software and a growing number don’t require even an invoice anymore. How will GST be levied on them?

Agents are required to raise an invoice on the university for their GST audit trail, even if the university does not need it.

The solution is to make invoices inclusive of GST so that once the payment is received by the agent (supplier), they can then calculate and deposit the tax. This is a procedural issue that may be best resolved by amending the terms of agreements with individual agents.

5. Since agents’ work is not B2B but B2C (with the UK university being the customer) is the ‘intermediary service’ actually an ‘export of services’ and therefore exempt from GST?

No, agents’ work would not qualify under the definition of ‘export of services.’

‘Export of services’ is defined by meeting all the following five conditions:

1. the supplier of service is located in India
2. the recipient of service is located outside India
3. the place of supply of service is outside India
4. the payment for such service has been received by the supplier of service in convertible foreign exchange, and
5. the supplier of service and recipient of service are not merely establishments of a distinct person in accordance with explanation 1 of section 5

In the case of agents’ work, the third condition above is not met, because the place of supply of services is in India applying the rule defined for ‘intermediary’ services.

6. GST is an additional expense for universities which they cannot account for in their own GST returns as per their local laws and accounted for as per the accounting system overseas. Surely GST paid and GST received need to be under the same accounting system?

No. The two systems are different. Even in the pre-GST regime, these transactions were taxable (under the Service Tax Post-Introduction of Place of Provision of Services Rules, 2012 and further clarified in 2014).

7. Agents are expressing concern about who will pay the additional 3% as a key principle of GST is that it is paid by the final recipient of the service, but in this case, the recipient is in a non-taxable region.

Agents need to charge GST on invoices since the obligation to deposit the tax sits with them as the supplier located in the taxable territory. GST, as a nationwide tax, has enabled the government to move tax returns online and achieve a much higher level of transparency and consistency. Not paying tax and submitting GST returns would be an unwise move for agents.

8. How can universities address this with their agents?

For agents that have been charging Service Tax, the added tax burden should not be a major impediment. When assessing who should bear the additional 3% due, it should be noted that the agent will, in due course be able to offset GST against GST input credits (and is therefore likely to gain overall). However, it is fair to say that there will be some time lag for this (1-2 years).

For agents that have not been charging Service Tax, universities will need to engage in discussions with them to agree how this additional financial burden is handled. Considerations to factor into these discussions include:

  • Agents may not have full visibility of their overall cost to the university as most are unlikely to know that VAT is also being paid on a reverse charge basis by most institutions in the UK (and for most may not recoverable). It is important that they understand the total cost of the service and that the university is already incurring a tax burden.
  • It seems counter-intuitive that the university should pick up the full burden when it is the agent that has not been following the tax laws in India.
  • As outlined above, agents will be able to offset GST output against GST input credits for costs they incur.

Agents have an important role to play and contribute significantly to the industry. If the total cost of recruiting via this channel increases, at some point institutions will be forced to review their recruitment strategies to ensure adequate diversification with other channels.


The comments set forth in this note are general in nature and are based on the existing statutory laws and regulations prevailing as of the date of this note. If there is a change, including a change having a retrospective effect, in the statutory laws and regulations, the discussions and comments expressed in this presentation would necessarily have to be re-evaluated in light of the changes.

Comments mentioned in this presentation are based on our understanding and interpretation of the legislation and are not binding on any of the regulators. There is no assurance that the regulators will not take a position contrary to our comments.

This note has been prepared exclusively for BUFDG. It should not be used, reproduced or circulated for any other purpose, in whole or in part, without prior written consent of Sannam S4.

All analysis, conclusions and recommendations contained in this note are based on our view and opinion. We would not be responsible for any liabilities or loss suffered due to the decision taken based on general views shared in this presentation. We would recommend taking specific advice on the reader’s key objectives.

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