SCOPE OF PRINCIPAL AGENT RELATIONSHIP IN THE CONTEXT OF SCHEDULE-1 OF GGST ACT
Circular No. 1819037/40 Dated:- 10-9-2018 Uttar Pradesh SGST
GST – States
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Document 1
fanion 13-07-2018
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Circular No. 57/31/2018-GST
CBEC-20/16/4/2018-GST
Government of India
Ministry of Finance
Department of Revenue
Central
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T Act hereby
clarifies the issues in the succeeding paras.
2. As per section 182 of the Indian Contract Act, 1872, an “agent” is a person employed to do any
act for another, or to represent another in dealings with third person. The person for whom such act is
done, or who is so represented, is called the “principal”. As delineated in the definition, an agent can be
appointed for performing any act on behalf of the principal which may or may not have the potential for
representation on behalf of the principal. So, the crucial element here is the representative character of
the agent which enables him to carry out activities on behalf of the principal.
3.
follows:
4.
The term “agent” has been defined under sub-section (5) of section 2 of the CGST Act as
“agent” means a person, including a factor, broker, commission agent, arhatia, del credere
agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the
business of supply or receipt of goo
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ST
Act, the key element of consideration is not required to be present for treating certain activities as
supply. One such activity which has been detailed in para 3 of Schedule I (hereinafter referred to as “the
said entry”) is reproduced hereunder:
6.
3. Supply of goods-
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of
the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of
the principal.
Here also, it is worth noticing that all the activities between the principal and the agent and vice
versa do not fall within the scope of the said entry. Firstly, the supply of services between the principal
and the agent and vice versa is outside the ambit of the said entry, and would therefore require
“consideration” to consider it as supply and thus, be liable to GST. Secondly, the element identified in
the definition of “agent”, i.e., “supply or receipt of goods on behalf of the pr
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, such agent shall not fall within the ambit of Schedule I of the CGST Act.
Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the
name of the agent then further provision of the said goods by the agent to the principal would be covered
Page 2 of 4
Circular No. 57/31/2018-GST
by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or
receive the title of the goods on behalf of the principal.
8.
Looking at the convergence point between the character of the agent under both the CGST Act
and the Indian Contract Act, 1872, the following scenarios are discussed:
Scenario 1
Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers who
can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send the goods and issue the
invoice directly to Mr. A. In this scenario, Mr. B is only acting as the procurement agent, and has in no
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The invoice for the supply of the painting is issued by M/s B on the behalf of Mr. A but in his own name
and the painting is delivered to the successful bidder. In this scenario, M/s B is not merely providing
auctioneering services, but is also supplying the painting on behalf of Mr. A to the bidder, and has the
authority to transfer the title of the painting on behalf of Mr. A. This scenario is covered under Schedule
I.
A similar situation can exist in case of supply of goods as well where the C&F agent or commission
agent takes possession of the goods from the principal and issues the invoice in his own name. In such
cases, the C&F/commission agent is an agent of the principal for the supply of goods in terms of
Schedule I. The disclosure or non-disclosure of the name of the principal is immaterial in such
situations.
Scenario 4
Mr A sells agricultural produce by utilizing the services of Mr B who is a commission agent as per the
Agricultural Produce Marketing Committee
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his aggregate
turnover of supply of taxable services exceeds the threshold specified in sub-section (1) of section 22 of
the CGST Act. In scenario 3, M/s B shall be liable for compulsory registration in terms of the clause
(vii) of section 24 of the CGST Act. In respect of commission agents in Scenario 4, notification No.
12/2017 Central Tax (Rate) dated 24.06.2017 has exempted ââ¬Åservices by any APMC or board or
services provided by the commission agents for sale or purchase of agricultural produce” from GST.
Thus, the 'services' provided by the commission agent for sale or purchase of agricultural produce is
exempted. Such commission agents (even when they qualify as agent under Schedule I) are not liable to
be registered according to sub-clause (a) of sub-section (1) of section 23 of the CGST Act, if the supply
of the agricultural produce, and /or other goods or services supplied by them are not liable to tax or
wholly exempt under GST. However, in cases where the supp
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