Does GST apply to a referral commission an Indian partner earns from a US company?

The short answer for Indian partners

Whether GST applies to a referral commission from a US company usually depends on one question: does your service count as an intermediary service? If it does, Indian GST law can treat the supply as taking place in India, so GST may be payable even though the client and the money are abroad. If it does not, the commission may qualify as an export of services, which is zero-rated and is commonly invoiced under a Letter of Undertaking (LUT) without paying GST up front.

Income tax is a separate track. An Indian resident generally reports the commission in the Indian income tax return regardless of the GST answer. Both questions belong with a chartered accountant who can see your registration, your turnover and the actual referral terms. This page cites no Indian primary source, so have your CA check each point against the GST Acts and CBIC circulars in force.

Why the intermediary question decides the GST outcome

Export treatment depends on several conditions, including where the recipient is located, where the supply is treated as taking place and how payment is received. For many consulting services billed to a foreign client, the place of supply follows the client's location, which is what allows them to qualify as exports. Intermediary services are the well-known exception: their place of supply can be the supplier's own location in India.

A referral commission sits close to that line because, by its nature, it involves a third party. Your CA will look at the facts rather than the label on the invoice, so calling yourself a consultant instead of a referrer does not change the outcome.

The three-party test your CA is likely to apply

• Three parties: is there a supply between two other parties, with you connecting them?
• Facilitation, not own-account supply: are you arranging or facilitating that supply, rather than providing a service of your own to the payer?
• Linked pay: does your commission depend on that other supply happening?

Three ticks point towards intermediary treatment. Fewer ticks make an export argument easier to support, but the conclusion is your CA's to reach.

Facts about a SourceX referral to hand your CA

Give your adviser the arrangement as it actually works:

• You introduce a US company to SourceX through your referral link or the referral form and share basic fit information only.
• SourceX, not you, qualifies the company, runs its data inventory, agrees price and terms with it, manages buyer review, contracts and arranges delivery.
• You never export, upload or describe the company's records, and you do not negotiate for either side.
• Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, paid only after the buyer pays and SourceX receives its fee. No reward is guaranteed.
• SourceX pays the reward out of its own fee, so the company's proceeds are not reduced by it.

Attach a dated copy of the program terms so your CA reads the actual payer, trigger and payment terms rather than a summary. The rewards page restates the payout conditions in plain language.

The LUT route if the commission is an export

If your CA concludes the commission is an export of services, an LUT lets a registered supplier issue export invoices without paying integrated GST first and claiming it back later. Practical points that trip people up:

1. Timing. An LUT covers a financial year, so check that one is in place before you raise the first invoice of the year.
2. Invoice wording. Export invoices under an LUT carry specific wording; use the text your CA specifies.
3. Proof of receipt. Keep the bank's inward remittance advice or foreign inward remittance certificate for each payment, since it shows the money arrived in foreign exchange.
4. Returns. Report the invoice as a zero-rated supply in the period it is issued.

Common situations for Indian partners

Income tax: what Indian residents report

An Indian resident is generally taxed on income from all sources, so a commission paid from the US is reportable whether it lands in an Indian account or stays abroad. If you refer as part of a consulting or advisory practice, it is likely business or professional income; an isolated commission may be classified differently. Ask whether advance tax instalments apply once the payment is expected.

On the US side, an Indian individual is usually asked for Form W-8BEN and a firm for Form W-8BEN-E; the Canadian page on US referral fees explains what those forms do. The IRS guide for payers, Publication 515, says pay for services a nonresident performs inside the United States is generally subject to withholding and that tax treaties can reduce US tax. Doing all the work from India is a different fact pattern, so raise it with the payer and your adviser. If any US tax is withheld, ask your CA how a foreign tax credit is claimed and what it requires.

Questions to ask your chartered accountant

1. Is a SourceX referral commission an intermediary service in my case, or an export of services?
2. Do I need GST registration now, or only once my turnover changes?
3. If it is an export, is my LUT current and what wording should my invoice carry?
4. Under which head of income should I report the commission, and do advance tax instalments apply?
5. Which remittance purpose code should I give my bank for these receipts?

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

Indian partners can introduce US companies only, typically through US clients they have served or former colleagues now leading US businesses; the guide to building a US referral practice from an international network shows how. Check the formula with the referral earnings calculator, settle the GST question with your CA, then register as a partner in the name that will invoice and receive the reward.