HC: No GST on Commission Paid to Pigmy Agents:

HC: No GST on Commission Paid to Pigmy Agents The petitioner, Karnataka Vikas Grameena Bank, challenged multiple show-cause notices issued by the Commercial Tax Department proposing to levy GST on commission paid to Pigmy Agents. These agents were engaged to collect small deposits from customers at their doorstep. The Department contended that such agents were providing “banking support services” and the commission paid to them attracted GST under the Reverse Charge Mechanism (RCM). The Bank, however, argued that Pigmy Agents function as employees, working under the supervision and control of the Bank, and therefore their services fall within the exclusion provided under Schedule III of the CGST Act. It relied on prior judicial precedents where such agents were recognized as “workmen” under labour laws.

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Issue Before Court: Whether commission paid to Pigmy Agents is subject to GST under RCM, or whether the relationship between the Bank and agents constitutes an employer-employee relationship exempt under Schedule III of the CGST Act. HC Decided: The High Court allowed the writ petition and quashed the show-cause notices, holding that no GST is leviable on such commission payments. The Court observed that the nature of engagement of Pigmy Agents had already been settled in earlier judicial pronouncements, where they were held to be “workmen” due to the degree of supervision, control, and integration with the Bank’s operations. It noted that the agents worked under prescribed banking hours, followed instructions issued by the Bank, and operated within its administrative framework.

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Such characteristics clearly establish an employer-employee relationship. In light of Section 7 read with Schedule III of the CGST Act, services rendered by an employee to an employer in the course of employment do not qualify as “supply” and are therefore outside the scope of GST. Therefore, the Court held that commission paid to Pigmy Agents cannot be subjected to GST under RCM and the impugned notices were liable to be set aside. To Read Full Judgment, Download PDF Given Below