Income Tax and GST on Money Transfer Business

Many People engage in money Transfer business do the money transfer in banks or Wallets like (PayTM, Phonepe, Mobikwik) or Aadhaar Enabled Payment System against a small amount of fee or commission of 1 or 2%. Despite of small amount, GST and Income Tax has not given any relief to it. Lets read through this article about the implications of GST and Income Tax on Money transfer commission agents transferring fund in domestic area of India.

Money transfer is a very easy procedure but has high tax implications. The person who wishes to send money must first deposit the funds with agent. The agent would then send the money to the sender via NEFT or IMPS or RTGS or UPI. It follows a very simple and straightforward procedure. Why people go for this service, the answer is because of the advantages of this –

There will be no more waiting in line to send money.
Simple to use
You can get the money transferred even if you don’t have a bank account.
Secure and Safe
There is no need to carry cash.
Within 24 hours, money is transferred to the intended recipient.

Is money transfer considered income?

No, only the commission or the fee charged against the fund transfer will be the income. For example, Babatax transfers Rs 1 lakh to Riya and charged Rs 1000 as commission. In this case, only Rs 1,000 will be considered income of BabaTax not the Rs 1,01,000.

Can I do money transfer business from my saving account?

You must maintain separate Bank account for money transfer. Money transfer businesses must have Current account. Since no. of transactions and amount of transactions are high in money transfer business.

Does Money transfer business requires Income Tax Audit?

One my friend does Money Transfer Business, he gets only 1% commission on transfer but in the bank statement there will be more than 1 crore cash deposit.

For a financial year, if the total commission income does not exceed Rs 1 crore, no tax audit is required by the Money transfer business. However, there are various trade practices prevalent in the country in regard to fund transfer business and no uniform pattern is followed by the commission agents. Terms and Conditions of transaction may warrant Tax Audit. Each transaction, therefore, requires to be examined with reference to its terms and conditions and no hard and fast rule can be laid down as to whether the agent is acting only as an agent or also as a principal.

Is Fund transferred liable for GST?

Yes, Money transfer businesses are not away from GST. Fund transferred are not liable for GST. However, the commission charged is liable for 18% GST. Continuing the above example, BabaTax has to pay Rs 180 for Rs 1,000 commission charged.

There is no specific provision for money transfer business under GST, it will covered under other services auxiliary to financial services, SAC 997159.

GST Registration required for money transfer business?

Yes, a Commission Agent is required to obtain Compulsory Registration u/s 24(vii) of CGST Act, irrespective of its turnover. Thus, the threshold limit of Rs.20 lakh does not apply to an Agent.