There was various presentation received from the industry by GST Board, regarding the scope and ambit of the principal agent relationship in line with del-credere agent. In order to clarify the same the board has came up with various circulars.
Definition of Del Credere Agent:
Del-Credere agent is no where defined under GST law. So, the del credere agent should be understood its meaning under common parlances as a selling agent who assist the principal supplier by contacting the potential buyers on behalf of the principal.
The distinguishing factor among Del credere agent and other agent is that it guarantees payment to the supplier. In case where the buyer fails to pay the supplier by due date. Del Credere Agent makes good the payment on behalf of the recipient. Therefore, the commission received by the del credere agent is higher than the commission paid to the other agents the amount paid by the del credere agent for the sum paid by him on behalf o f the recipient shall be considered as financing service rather than brokerage.
The circular no. 57/31/2018-GST dated 4th September 2018 clarifies it clearly that Del credere agent falls under the ambit of agent. Also, the definition of agent under section 2(5) of CGST Act, 2017 clearly states agent includes del credere agent.
Q1. Whether a Del Credere Agent falls under the ambit of agent under Para 3 of Schedule I of the CGST Act?
A.1 In case of supply of goods, if the invoice is issued by supplier to customer either himself or through del credere agent then it does not fall under the ambit of agent. However, in case where the invoice is issued by the del credere agent than it would fall under the ambit of agent.
Q2. Whether the temporary loan extended by Del Credere Agent to the recipient, for which interest is charged, is to be included in the value of goods being supplied by the supplier where he/ she is not an agent under Para 3 of Schedule I of the CGST Act?
A2. No, since the loan extended by the del credere is on principal to principal basis and is independent supply. Also vide Notification no.12/2017-CT ( R ) dated 28th June 2017 the services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) has been exempted.
Q3. Whether the temporary loan extended by Del Credere Agent to the recipient, for which interest is charged, is to be included in the value of goods being supplied by the supplier where he/ she is an agent under Para 3 of Schedule I of the CGST Act?
A3. Yes, Since the supply of service of del credere is no more independent of supply of goods made by supplier .Therefore the supply of service by way of extension of credit would not be considered as independent supply and the interest charged for such credit would form part of value of supply as required under section 15(2) of CGST Act,2017 .