Pure Agent Concept in GST: The GST Act defines an Agent asa 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 agent.
Pure Agent Concept in GST
Relevance of Pure Agent under GSTThe concept is borrowed from the erstwhile Service Tax Determination of Value Rules, 2006 and carried forward under GST. Under the GST Valuation Rules 2017, a pure agent is given the following meanings. A “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
- (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for the supply he provides on his own account
EXCLUSION FROM VALUEExpenditure incurred as pure agent becomes relevant, 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.
- (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 the pure agent to the recipient of service
- (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
- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B
- Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to Registrar of the Companies
- The fees charged by the Registrar of the Companies registration and approval of the name are compulsorily levied on B
- A is merely acting as a pure agent in the payment of those fees.
- Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.
- Port fees, Port charges, Custom duty, dock dues, transport charges etc. paid by Customs Broker on behalf of owner of goods.
- Expenses incurred by C&F agent and reimbursed by principal such as freight, godown charges.
|S.No||Component charged in invoice||Amount|
|1||Agency Income||Rs. 10000/|
|2||Traveling expenses; Hotel expenses||Rs. 15,000/-|
|3||Customs Duty||Rs. 55,000/-|
|4||Docks Dues||Rs. 5000/-|