Specific provisions related to Agent under GST Act:

♣ Definition of Agent: (Section 2(5) of CGST Act)

Agent means the person who are engaged in supply of goods or services / recipient of goods or services on the behalf of others that’s say principal of such goods / services. Agent includes broker, commission agent, an auctioneer or other mercantile agent, by whatever name is called.

As per Schedule I of CGST Act, if there is supply of goods by a principal to an agent or by an agent to his principal without consideration, then even such transaction shall be treated as supply under CGST Act.

♣ Mandatory Registration: (Section 24 of CGST Act)

As per section 24 of CGST Act, the person who makes the taxable supply of goods or services on the behalf of the others like agent is mandatory to take the registration under GST. It means that the threshold limit of Rs. 20 / 10 Lakh as mentioned under section 22 is not applicable in a case of agent. If an agent made the taxable supply of Re. 1, then even he shall be liable to get registered under GST.

♣ Valuation of Supply of Goods or Services: (Section 15 and Rules 29,30,31,33 of CGST Act)

As per Rule 29, if the goods or services have been supplied between the principal and agent, then the value of supply of goods or services shall be the open market value of the goods being supplied, or at the option of the supplier, be 90% of the price charged for the supply of goods of like kind and quality by the recipient (Agent) to his customer not being a related person, where the goods are intended for further supply by the said recipient (Agent).

As per Rule 30, if the value of supply of goods or services is not ascertainable through above Rule (Rule 29) then the value shall be 110% of cost of production or manufacture or cost of acquisition or cost of provisions of service.

As per Rule 31, if the value of supply of goods or services is not ascertainable through above Rules (Rule 29 and 30), then the value of supply of goods or services shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter

Valuation of supply of goods or services in case of pure agent: (Rule 33 of CGST Rules)

The expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

  • 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;
  • 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
  • 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.

Meaning of Pure Agent:

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.

♣ Maintenance of Accounts and Records: ( Rule 56 Sub Rule 11 of CGST Rules)

Every agent shall maintain the following accounts,-

(a) particulars of authorisation received by him from each principal to receive or supply goods or services on behalf of such principal separately;

(b) particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal;

(c) particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal;

(d) details of accounts furnished to every principal; and

(e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.

♣  Liability In case of Agent of Minor: (Section 91 of CGST Act)

If a person act as a agent of a minor or other incapacitated person, then any tax, interest, penalty or any other charges payable by such minor shall be levied or recoverable from such agent under CGST Act.

Points to be Noted:

  • If one person exercising the option to pay tax under section 10 (Composition Scheme), then stocks held by such person shall not include the stock received from his agent outside the state (Rule 5 of CGST Rules).
  • If the principal is going to be register under GST, then the turnover of his agent shall not be considered for this purpose (As per GST Tweeter FAOs).

Warm Regards,

Rahul Grover

info@raagconsultants.com

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Category : Goods and Services Tax (6882)
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