Finance GST 2016 Taxation

Value of supply of services in case of pure agent

We saw GST valuation general rules in previous article now we will wee special valuation rule for Pure agent.

you can read general valuation rule below:

Valuation rule under GST

Notwithstanding anything contained in these 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:-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes 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, “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 .

Example: 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.

 

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