Real estate brokerage and commission income is taxable at 18%, irrespective of whether the underlying property is residential, commercial, under-construction or ready-to-move. The rate does not depend on the GST treatment of the property itself: even where the sale of the property is outside GST because it is a completed flat or a ready-to-move commercial unit, the broker’s commission is a separate taxable service at 18%. The broker must register once aggregate turnover crosses ₹20 lakh (₹10 lakh in the special category states specified for services), and aggregate turnover includes all brokerage and commission income across transactions.
The Flat Rate and the SAC
Brokerage and commission services are generally classified under SAC 9972 or 9962 depending on the nature of the service and the segment. The rate is 18% for intra-state supplies as CGST plus SGST, and 18% as IGST for inter-state supplies. The broker should describe the service as brokerage or commission, identify the property and the transaction, and show the GSTIN of the broker and the recipient on the invoice.
The flat-rate principle has a practical consequence: a broker cannot argue that the commission should be exempt or taxed at a lower rate because the underlying property is residential, affordable or ready-to-move. The commission is consideration for the broker’s service, not a share in the property’s tax treatment.
Registration and Aggregate Turnover
The ₹20 lakh threshold is computed on an all-India, PAN-based basis. Brokerage income from residential sales, commercial leases, rental arrangements and referral fees is aggregated. A broker operating as a sole proprietor and also receiving commission through a separate entity must determine whether the receipts belong to the same taxable person or to distinct persons.
Voluntary registration below the threshold can be relevant where the broker incurs creditable input tax on office rent, advertising, software or professional services and expects taxable output. But the compliance cost of registration should be weighed against the credit benefit.
TDS and the Broker’s Cash Flow
Where the payer is liable to deduct tax at source on commission under Section 194H of the Income-tax Act, the TDS is an income-tax withholding, not a GST adjustment. The broker’s GST liability is on the gross commission, and the TDS credit is claimed in the income-tax return. The broker should not reduce the GST taxable value by the TDS amount. Similar care is required where the commission is embedded in a rental arrangement and TDS under Section 194I is deducted on rent; the GST treatment of the rent and the commission should be kept distinct.
The Export and Intermediary Question
Where a broker earns commission from a foreign client—for example, a foreign property buyer, a foreign landlord or an overseas developer—the export-of-services analysis under Section 2(6) of the IGST Act applies. The five conditions must be satisfied cumulatively: supplier in India; recipient outside India; place of supply outside India; payment in convertible foreign exchange or permitted Indian rupees; and supplier and recipient not establishments of the same person.
The intermediary characterisation is the central risk. If the broker merely facilitates a supply between a foreign buyer and an Indian seller, the broker may be characterised as an intermediary, and the zero-rated export treatment can be denied. If the broker supplies the service on its own account to the foreign client—with defined deliverables, liability for performance and the foreign client as the person liable to pay consideration—the principal-to-principal characterisation supports export treatment. The contract should reflect the principal-to-principal relationship, and the broker should maintain foreign exchange realisation evidence.
What the Broker Should Control
The broker’s GST position depends on three variables: whether all brokerage income is reported at 18% irrespective of the property type; whether aggregate turnover across transactions crosses the registration threshold; and, for foreign clients, whether the service is structured and documented as a principal-to-principal export rather than an intermediary facilitation. The broker that controls these variables avoids under-reporting commission and mischaracterising foreign income.
Call to Action: We advise real estate brokers, agencies and property consultancies on GST registration, commission reporting, TDS interaction and export documentation. For a broker-specific review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.