GST 2025 for MFDs and Insurance Agents: What Changed, What Didn’t
Sep 3, 2025
On 3 September 2025, the government announced GST reforms that take effect on 22 September 2025. Individual term and individual health insurance premiums move to 0 percent GST. Mutual fund distributor commission treatment remains unchanged. This post explains what that means for MFDs and insurance agents, how charging works under forward charge vs reverse charge, and how thresholds apply if you wear both hats.
1) Pre-GST vs GST recap
Pre-GST, insurance premiums generally bore service tax of about 15 percent. Since 1 July 2017, insurance premiums were typically at 18 percent GST; insurance agent commission fell under reverse charge on the insurer; MFD commission has been taxed at 18 percent when the MFD is registered.
2) What changed on 3 Sep 2025 and when it applies?
Insurance premiums for individual term and individual health policies are set to 0 percent GST, effective 22 September 2025. Mutual fund distribution commission rules are unchanged. Keep your MF invoicing as is.
3) Forward charge vs reverse charge
Forward charge means the supplier adds GST to the invoice and pays it to the government. Example: a registered MFD raises an invoice on the AMC with 18 percent GST and remits the tax.
Reverse charge means the recipient pays the GST because the law notifies that category. Example: services by an insurance agent to an insurer are notified under reverse charge - the insurer pays the GST, not the agent.
4) Current position by business type
Insurance agents
• Commission to insurers continues under reverse charge per Notification 13/2017-Central Tax (Rate). If you only make reverse-charge supplies, you are exempt from registration under Notification 5/2017-Central Tax.
Mutual fund distributors
• Rate: 18 percent on brokerage when you are GST-registered and invoicing under forward charge.
• Below threshold: if your aggregate services turnover is under ₹20 lakh in a financial year (₹10 lakh in special category states), you do not register and you do not charge GST. There is no specific reverse-charge notification placing GST on the AMC for payouts to unregistered MFDs.
5) Thresholds and how “aggregate turnover” is counted
Aggregate turnover is computed on an all-India basis for persons having the same PAN, and it includes taxable supplies, exempt supplies and inter-State supplies, but excludes inward supplies taxed under reverse charge. For services, the basic registration threshold is ₹20 lakh (₹10 lakh in specified special category states). Inter-State service suppliers up to ₹20 lakh are also exempted from compulsory registration by Notification 10/2017-IGST.
6) If you are both an MFD and an insurance agent
Your ₹20 lakh threshold is at the aggregate level across your PAN, not per activity. Example: if you earn ₹12 lakh as MF commission (forward charge when registered) and ₹11 lakh as insurance agency commission (which is a reverse-charge supply to insurers), your aggregate turnover is ₹23 lakh. You must register and charge GST on forward-charge supplies like MFD brokerage from the date you cross ₹20 lakh. Reverse-charge supplies to insurers remain under RCM (reverse charge mechanism) on the recipient.
7) What to do for the 22 Sep 2025 go-live
Insurance: from 22 Sep 2025, invoices for individual term and individual health premiums show 0 percent GST. Commission to agents remains under reverse charge on the insurer.
Mutual funds: registered MFDs continue forward-charge invoicing at 18 percent with the usual SAC and place-of-supply logic; sub-₹20 lakh MFDs remain outside GST and do not charge GST.
8) Where the debate is headed
Industry bodies representing MFDs have petitioned the GST Council to reduce GST on MF distribution from 18 percent to 5 percent and to consider compliance relief. The Council has not announced any change on MFD commission rates as of 3 September 2025.
FAQs
Q: What dates matter?
A: Announcement: 3 September 2025. Effective date for new insurance premium rates: 22 September 2025.
Q: Does MF commission change under the reforms?
A: No. Registered MFDs stay at 18 percent under forward charge; below-threshold MFDs do not register and do not charge GST.
Q: I only act as an insurance agent. Do I need GST registration
A: If you only make supplies that are reverse charge on the insurer under Notification 13/2017-CT(R), you are exempt from registration under Notification 5/2017-CT. If you start any forward-charge supply or cross thresholds, reassess.
Q: If I am both an MFD and an insurance agent, is the ₹20 lakh limit separate
A: No. Your threshold is measured on aggregate turnover across the same PAN — all activities combined on an all-India basis.
Bottom line for 22 Sep 2025. Insurance: individual term and individual health premiums are at 0 percent GST; commissions remain under reverse charge on the insurer. Mutual funds: registered MFDs keep invoicing at 18 percent; sub-₹20 lakh MFDs remain outside GST with no GST to pay or charge.