GST – GST Law and Procedure – 026 – Chapter Twenty Six Pure Agent Concept in GST Introduction The GST Act defines an Agent as 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 goods or services or both on behalf of another. So, who is a pure agent and why is a pure agent relevant under GST? Broadly, speaking a pure agent is one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his own supply) for such supplies from the recipient of the main supply . While the relationship between them (provider of service and recipient of service) in respect of the main service is on a principal to principal basis, the relationship between them in respect of other ancillary services is that of a pure a
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, 2006 and carried forward under GST. Under the GST Valuation Rules 2017 pure agent is given the following meaning. pure agent means a person who – a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; b) neither intends to hold nor holds any title to the goods or services or both, so procured or provided as pure agent of the recipient of supply; c) does not use for his own interest such goods or services so procured; and d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. The important thing to note is that a pure agent does not use the goods or services so procured for his own interest and this fact has to be determined from the terms of the contract. In the illustration of importer and Customs Broker given above, assuming that the contract was for clearance of
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elevant, when it comes to determining the value of a supply for levy of GST. The preceding para explains who will be considered as a pure agent. The valuation rules provide that expenditure incurred as pure agent, will be excluded from the value of supply, and thus also from aggregate turnover. However, such exclusion of expenditure incurred as pure agent is possible only and only if all the conditions required to be considered as a pure agent and further conditions stipulated in the rules are satisfied by the supplier in each case. The supplier would have to satisfy the following conditions (in addition to the condition required to be satisfied to be considered as a pure agent) for exclusion from value as under:- i. the supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party on authorization by such recipient; ii. the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by
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s, Port charges, Custom duty, dock dues, transport charges etc. paid by Customs Broker on behalf of owner of goods. 2. Expenses incurred by C& F agent and reimbursed by principal such as freight, godown charges. Illustration: Suppose a Customs Broker issues an invoice for reimbursement of a few expenses and for consideration towards agency service rendered to an importer. The amounts charged by the Customs Broker are as below: S/No. Component charged in invoice Amount 1 Agency Income ₹ 10, 000/- 2 Traveling expenses ; Hotel expenses ₹ 15,000/- 3 Customs Duty ₹ 55,000/- 4 Docks Dues ₹ 5000/- In the above situation, agency income and travelling/hotel expenses shall be added for determining the value of supply by the Customs Broker whereas Docks dues and the Customs Duty shall not be added to the value provided the conditions of pure agent are satisfied. CONCLUSION A pure agent concept is an important one for businesses as it has direct implications on the valu
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