Provisions under Rule 33 of the Central Goods and Services Tax (CGST) Rules, 2017 relating to “Value of supply of services in case of pure agent”, are as under:
CGST Rule 33: Value of supply of services in case of pure agent (Chapter-IV: Determination of Value of Supply)
Notwithstanding anything contained in the provisions of this Chapter, 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,-
(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.
Explanation.- For the purposes of this rule, the expression “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.
Illustration.- 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 the Registrar of Companies. The fees charged by the Registrar of Companies for the 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.
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Note: The CGST Rules 2017 along with the prescribed Forms were initially notified vide Central Tax Notifications 3/2017 dated 19/06/2017 (Rule 1 to 26), 10/2017 dated 28/06/2017 (Rules 27 to 138) and 15/2017 dated 01/07/2017 (Rules 139 to 162). These Rules/ Forms were subsequently amended by CBIC through various Notifications issued from time to time. Information on this page is a Rule-wise compilation of the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.
| CBIC Updates (GST) |
| Index of GST Circulars, Notifications, Press Releases, Orders, etc. issued by CBIC from 2017 and onwards along with Section-wise/ Rule-wise Text of GST Acts/ Rules: |
| CGST: CGST Act/ Definitions, CGST Rules, GST Forms |
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| GST Circulars (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| GST Instructions: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CGST Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| IGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017 |
| IGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| UT Tax/ UTGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017 |
| UT Tax/ UTGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| Compensation Cess Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| Compensation Cess Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CBIC Orders (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CBIC Press Releases: 2020, 2019, 2018, 2017 |
| Note: For Official/ updated copy, please visit the CBIC website. |
We sell finished goods on Ex Mill delivery basis i.e. only price of the material will be fixed and remaining taxes, insurance and freight is to be born by the customer/ buyer/ consignee. While dispatching material by truck, driver asks for some advance amount to meet expenses like fuel, toll, food, etc. hence we give the driver some amount towards freight advance which is deducted by the buyer at the time of settlement of freight and the same amount is subsequently reimbursed to us. Also, the same advance amount is shown in our invoice and added to the sale value of the goods. Will the freight advance paid by us to the driver attract GST? If so, at what rate?
It will attract GST @ of your Principal Supply. It is so because the value shall include all incidental expenses in relation to sale such as packing, commission etc. Another possible view can be that one can exclude the same and contend over this that he is acting as a pure agent. And recovering the same. But it would be difficult to prove the same in eyes of law. So it is better to take it as a part of supply. Further tax paid on such freight amount will be available as credit to recipient and he needs to pay under RCM only over the remaining amount (GTA).
I am a sub broker (stock broking) with less than Rs. 20 lakhs brokerage. Whether I am required to get GST registration?
As Civil Contractors, we undertook one contract as PMC but had to leave the contract after working for 2-3 months. As per settlement, we raised PMC bill for 50 Lakhs but the principal asked for two separate invoice (Consultancy Rs. 30 Lakhs and Reimbursement of Expenses Rs. 20 Lacs). We raised 2 separate invoices charging GST on both invoice in March 2019 and discharged our tax liability subsequently in due course. Now the Principal has refused to pay GST amount on reimbursement portions (Rs. 20 Lacs) on the grounds that same is not applicable. Whether their contention is right? If so, then how we can reverse the GST on Reimbursement bill?
Say I issued an invoice of Rs100 for supply of services. Out of thoses services, Rs 40 services are supplied as pure agent (all condition under Rule 33 satisfied). So my taxable value will be Rs 60 and i will charge GST on same. The question is, under which head i will report the remaining Rs 40. Shall i report them as Non-GST Supply?
We have Open a letter of credit in favour of a party for supply of material but as per payment terms of Purchase order and L/C opening charge will be on account of Supplier. We have paid L/C opening charges to our bank now we have to recover the same from party. we are raising debit note for recovery of bank charges, please advise whether we have to charge GST on bank charges
We have made supplies to xyz mill as commission agent and paid unloading and freight on their behalf. Tax invoice issued in FY 2017-18 without GST under section 33 CGST rule 2017 as pure agent. Are we required to pay tax in this condition or not? SGST notice issued to us stating that said condition of pure agent is not fulfilled u/s 33 of CGST Act. Can someone guide?