As per Sec 2(5) of the CGST Act, 2017, “agent” means a person, including a factor, broker, commission agent, arhatia, delcredere 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.

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 agent.

Concept of Pure Agent

The concept is borrowed from the erstwhile Service Tax Determination of Value Rules, 2006 and carried forward under GST. Under the GST Valuation Rules 2017 pure agent is given the following meaning.

As per the explanations appended to Rule 33 of the CGST Rules, 2017, the term “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 supplied 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.

Rule 33 :Value of supply  in case of supply made by “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, only & only if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation 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 the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Some examples of pure agent:

  1. Port fees, 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.
  3. ROC filing fee paid by CA/CS on behalf of client for company formation.

Illustration – 1

Mr A of Kolkata approaches M/s XYZ & Associates, Chartered Accountants for incorporation of a Pvt Ltd Company. The professional fee for the said service was Rs.25,000/-. Mr A also authorizes the CA firm to incur all the expenditure on his behalf & deposit the entire fee with to the Registrar of Companies (ROC), which he will reimburse the CA firm subsequently on production of fee receipts at actual.

M/s XYZ & Associates raised bill of Rs.2,25,000/- on Mr A which includes fee of Rs.2 lakhs paid to the ROC and Rs.25,000/- towards professional charges for rendering services. What is the value of supply for the purpose of levy of GST.


The fees charged by the Registrar of Companies for the registration of company is compulsorily levied on Mr A. M/s XYZ & Associates is merely acting as a pure agent in the payment of those fees. Therefore, recovery of such expenses by M/s XYZ & Associates is a reimbursement and not part of the value of supply made to Mr. A. The taxable value in the instant case shall be Rs.25,000/- only on which GST shall be levied.

Illustration – 2

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:

Component of Invoice Amount (Rs)
Agency fee 25,000/-
Travelling expenses & Hotel Bill 20,000/-
Customs Duty 75,000/-
Dock dues 5,000/-

Compute the value of supply on which GST shall be levied ?


Agency fee and travelling/ hotel expenses shall be added for determining the value of supply for the purpose of levy of GST whereas Docks dues and the Customs Duty shall not be added to the value provided the conditions of pure agent are satisfied.

Illustration – 3

Rural Electricity Corporation, New Delhi has signed a MOU with NBCC Limited for undertaking a project for construction of PCC Road, Community halls  and other social utility structures in Bihar under CSR Project. NBCC in turns execute the said works through contractors on open competitive bidding process. As per the terms of agreement, REC made advance payment of Rs.9 Crores to NBCC Ltd prior to commencement of work, being cost of awarded value which is deposited in a separate bank account. Expenditure is meet out of the same. The agreement stipulates that, any surplus fund is refunded back to REC and in the event of actual cost exceeds, additional cost is reimbursed to NBCC Ltd. NBCC is also eligible to receive 8% of actual cost of the project as ‘Agency Fee’. Actual cost incurred for the project was Rs.10 Crores & Agency fee paid to NBCC was Rs.80 lakhs.

What is GST implication & value of supply for the purpose of levy of GST?


The intention of the agreement is to engage NBCC Ltd in the capacity of pure agent to incur expenditure on behalf of REC Ltd and not to hold the title to goods and services procured in relation to this project nor does NBCC intends to use such goods or services for his own interest. Therefore, NBCC fulfills the criteria laid down for ‘pure agent’ in Rule 33 of Central Goods and Services Tax Rules, 2017.

As per the GST Act, such service shall be covered under SAC code 998339 i.e. Project management services for construction projects, attracting GST rate at the rate 18%.

Value of supply for the purpose of levy of GST shall be Rs.80 lakhs.

Author Bio

Qualification: CA in Job / Business
Company: NHPC Ltd
Location: Chamba, Himachal Pradesh, IN
Member Since: 01 Oct 2017 | Total Posts: 10
Shri S K Mishra, FCA, LL.B is a Fellow Member of The institute of Chartered Accountants of India, New Delhi & Fellow Members of the Institute of Cost Accountants of India, Kolkata. He specializes in the field of GST and Author of Amazon best Seller " Systematic Approach to GST " & "Indirect View Full Profile

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