Goods and Services Tax – GST – By: – CA.VINOD CHAURASIA – Dated:- 27-9-2017 – Introduction: This article discusses in detail about the Pure Agent concept in GST. The concept of Pure Agent concept in GST is explained in rule 33 of CGST rules, 2017. A pure agent is a registered taxable person who liaises between other suppliers on behalf of his client. Under this concept, while providing services to the client, he also undertakes to receive other ancillary services from other service providers, and incurs expenditure on behalf of his client. The actual expenditure incurred by a pure agent is later claimed as reimbursement. In other words, over and above the value of services rendered to his client, any other expenditure incurred by a pure agent (on behalf of his client) will be a reimbursement. Therefore, the relationship between the supplier and recipient with respect to the main service, is on a principal-to-principal basis. The relationship between them in respect of other ancillary
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penses incurred by ABC Export & Import Agency on transportation is claimed as reimbursement and will not be part of taxable value of customs broker service. Pure agent means a person who- 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. (This implies that there is an agreement in terms of ancillary supplies which supplier will receive and incur expenditure on behalf of the recipient. In the above example of customs broker services, ABC Export & Import Agency is authorised to receive and incur expenditure towards transportation services acting as pure agent of XYZ Traders.) Neither intends to hold nor holds any ownership to the goods and/or services so procured or provided as pure agent of the recipient of supply. (Considering the above example, as a pure agent, ABC Export & Import Agency should not hold any title of goods or services which are supplie
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ved.) Receives only the actual amount incurred to procure such goods and/or services in addition to the amount received for supply he provides on his own account (A pure agent should receive only the actual amount incurred on behalf of the recipient. If he claims more than the actual amount, he will not be considered as a pure agent. Assuming the transportation cost incurred by ABC Export Agency is ₹ 20,000, and if he claims more than ₹ 20, 000, he will be not considered as a pure agent for receiving the transportation services on behalf of XYZ Traders.) Conditions for excluding value of pure agent services Expenditure or costs incurred by the supplier as a pure agent of the recipient of service shall be excluded from the value from the value of taxable supply if all the following conditions are satisfied which are as follows: The service provider acts as a pure agent of the recipient of service when he makes payment to third party on authorization by such recipient. The pa
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ABC agrees to reimburse the actual transportation cost to XYZ agency. From above, we can conclude that: The services provided by XYZ agency is the main service sought out by ABC which would be on principal-to-principal basis. The transportation service received by the XYZ agency on behalf of ABC is on Pure Agent basis. The transportation expenses are claimed as reimbursement and will not be part of a taxable value of customs broker services. Illustration: 2 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 ₹ 10000/- 2. Traveling expenses; Hotel expenses ₹ 15,000/- 3. Customs Duty ₹ 55,000/- 4. Docks Dues ₹ 5000/- In the above situation, agency income and traveling/ hotel expenses shall be added for determining the value of supply by the Customs Broker
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