{"id":20950,"date":"2020-12-02T15:27:54","date_gmt":"2020-12-02T09:57:54","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=20950"},"modified":"2024-06-18T10:37:52","modified_gmt":"2024-06-18T05:07:52","slug":"concept-of-pure-agent-in-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/","title":{"rendered":"Let&#8217;s understand the Concept of Pure Agent in GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The term &#8216;Agent&#8217; has been defined under section 2(5) of <strong>CGST Act, 2017<\/strong> as a person including a factor, commission agent, broker, auctioneer or any other mercantile agent who carries on business of supply and receipt of services or goods on behalf of another. A pure agent is the registered taxable person who liaises between other suppliers on behalf of his client.<\/p>\n\n\n\n<p>The concept of this while providing\nservices to a client, he also undertakes to receive the ancillary services from\nservice providers and incurred expenditure on behalf of the client. The actual\nexpenditure incurred by the pure agent is later claimed as reimbursement. In\nother words, over and above a value of services rendered to his client, other\nexpenditure incurred by the pure agent (behalf of the client) can be reimbursed.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/#Illustration_of_Pure_Agent\" >Illustration of Pure Agent<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/#The_Relevance_of_Pure_Agent_in_GST\" >The Relevance of Pure Agent in GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/#How_to_Calculate_a_Pure_Agent_value_in_GST\" >How to Calculate a Pure Agent value in GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/#Conditions_applicable_to_Pure_Agent_escaping_the_Taxabilitys\" >Conditions applicable to Pure Agent escaping the\nTaxability\u2019s<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/concept-of-pure-agent-in-gst\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Illustration_of_Pure_Agent\"><\/span>Illustration of Pure Agent<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For example- A is an importer and B is a\nCustoms Broker. A approaches B for the customs clearance work in respect of an\nimport consignment. The clearance of an import consignment and delivery of the\nconsignment to A would require taking service of a transporter. Hence A\nauthorises B, to incur expenditure on his behalf for procuring services of the\ntransporter and agrees to reimburse B for transportation cost at actual.<\/p>\n\n\n\n<p>In given illustration, B is providing Customs Brokers service to A, which would be on the principal to principal basis. An ancillary service of transportation is procured by B on behalf of A as the pure agent and expenses incurred by B on transportation shall not form part of value of Customs Broker service provided by the B to A. This, in sum and substance, is a relevance of the pure agent in GST. Following are the examples of pure agents for your better understanding:-<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"1024\" height=\"512\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Illustration-of-Pure-Agent-1024x512.png\" alt=\"Illustration of Pure Agent\" class=\"wp-image-20951\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Illustration-of-Pure-Agent-1024x512.png 1024w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Illustration-of-Pure-Agent-300x150.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Illustration-of-Pure-Agent-768x384.png 768w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Illustration-of-Pure-Agent.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Relevance_of_Pure_Agent_in_GST\"><\/span>The Relevance of Pure Agent in GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The concept is borrowed from erstwhile\nService Tax Determination of Value Rules, 2006 and carried forward under the\nGST. Under GST Valuation Rules 2017, a pure agent is defined as a taxable\nperson who:-<\/p>\n\n\n\n<ul>\n<li>Enters into the contractual\nagreement with a recipient of supply to act as his pure agent to incur\nexpenditure or costs in a course of supply of goods and services or both; <\/li>\n\n\n\n<li>Neither, intend to hold nor\nholds any title to goods or services or both, so procured or provided as the\npure agent of the recipient of supply;<\/li>\n\n\n\n<li>Receives only an actual amount\nincurred to procure goods or services in addition to an amount received for\nsupply he provides on his account. <\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Calculate_a_Pure_Agent_value_in_GST\"><\/span>How to Calculate a Pure Agent value in GST?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Pure Agent in GST typically incurs the\nexpenditure on behalf of his client, and later the actual will be claimed as\nreimbursement. Thus, it needs to be clear whether the value mentioned in a pure\nagent invoice under GST, must be included or excluded in determining the\ntaxable value of supplies made by the pure agent to his client.<\/p>\n\n\n\n<p>In determining a value of taxable supply,\nany expenditure incurred by a supplier as the pure agent of the recipient must\nbe excluded from the value of supply. Thus, a pure agent concept in GST becomes\nmore relevant from a point of determining the taxable value.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conditions_applicable_to_Pure_Agent_escaping_the_Taxabilitys\"><\/span>Conditions applicable to Pure Agent escaping the\nTaxability\u2019s <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Expenditure incurred as the pure agent\nbecomes relevant when it comes to determining the value of a supply for levy of\nGST. The valuation rules provide that an expenditure incurred as the pure\nagent, will be excluded from a value of supply, and thus also from aggregate\nturnover. However, exclusion of expenditure incurred as the pure agent is\npossible only and only if all the conditions required to be considered as the\npure agent and further conditions mentioned in the rules must be satisfied by\nthe supplier in every case. <\/p>\n\n\n\n<p>A supplier must have to satisfy following conditions\nfor exclusion from value as under:-<\/p>\n\n\n\n<ul>\n<li>Any supplier acts as a pure\nagent of recipient of supply when he makes payment to &nbsp;third party on authorization by recipient;<\/li>\n\n\n\n<li>The payment made by a pure\nagent on behalf of recipient of supply has been separately indicated in an\ninvoice issued by the pure agent to recipient of service<\/li>\n\n\n\n<li>The supplies procured by a pure\nagent from the third party as the pure agent of recipient of supply are in\naddition to services he supplies on his own account.<\/li>\n<\/ul>\n\n\n\n<p>In case conditions are not satisfied, then\nexpenditure incurred must be included in the value of supply under GST.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A concept of a pure agent is an important one for businesses as it has direct implications on a value of taxable service. It has a direct bearing on an amount of the GST charged on a particular supply. It also has a bearing on an aggregate turnover of the supplier and therefore on calculating the threshold limit for <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST registration<\/strong><\/a>. <\/p>\n\n\n\n<p>Whenever an intention is to act as the pure agent, care should be taken to ensure that the conditions specified for pure agents and conditions given in the valuation rules are met so that only a real value of the service provided is subjected to the goods and service tax.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gstn-rolled-out-solutions-to-prominent-gst-errors\/\">GSTN Rolled out Solutions to Prominent GST Errors\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term &#8216;Agent&#8217; has been defined under section 2(5) of CGST Act, 2017 as a person including a factor, commission agent, broker, auctioneer or any other mercantile agent who carries on business of supply and receipt of services or goods on behalf of another. A pure agent is the registered taxable person who liaises between [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":20961,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1273],"acf":{"service_id":"96"},"authorName":"Soumya Bajpai","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/01\/0.jpg","authorDescription":"Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.","postViews":4719,"readingTime":3,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/20950"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=20950"}],"version-history":[{"count":13,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/20950\/revisions"}],"predecessor-version":[{"id":64813,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/20950\/revisions\/64813"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/20961"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=20950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=20950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=20950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}