Employee vs Agent GST

In a decisive ruling, the Karnataka High Court has reaffirmed a foundational GST principle: substance prevails over nomenclature.

The Court held that pigmy agents, despite being paid “commission,” are in law employees of the bank.

Accordingly, their services fall within Schedule III, outside the ambit of “supply”, and cannot be subjected to GST under reverse charge.

The judgment sharply rejects the Department’s attempt to recharacterize such agents as “business facilitators,” emphasizing that regulatory definitions cannot override the factual matrix of control, supervision, and economic dependence.

Importantly, the Court also demonstrates willingness to quash show cause notices at the threshold where jurisdictional error is evident.