{"id":25024,"date":"2021-01-28T12:10:08","date_gmt":"2021-01-28T06:40:08","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=25024"},"modified":"2021-01-28T17:06:50","modified_gmt":"2021-01-28T11:36:50","slug":"valuation-of-supply-principal-to-agent-and-vice-versa","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/valuation-of-supply-principal-to-agent-and-vice-versa\/","title":{"rendered":"Valuation of Supply-Principal to Agent and Vice Versa"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Goods and Service Tax (GST) brings and felicitate the concept of <strong><em>\u201cOne Nation One Tax\u201d <\/em><\/strong>under the economical regime of India. Under this particular, presently GST is charged on the<strong><em> \u2018Transaction Value\u2019<\/em><\/strong>. The transaction value refers to the price actually paid or payable for the supply of goods or services between un-related prices which is the sole consideration for the supply. In this blog, we will discuss about Valuation of Supply under the <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and services tax<\/strong><\/a> regime in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is Valuation of Supply of Goods?<\/h2>\n\n\n\n<p>Valuation of Supply includes such amount, which the\nsupplier is liable to pay but has been sustained by the recipient, and is not\nincluded in the price.<\/p>\n\n\n\n<p>The Value of Supply under GST shall include any taxes,\nduties, cess, fees, and charges levied under any act, except GST, where the\nCompensation Cess will be ruled. The\nValuation of Supply of goods and services is ordinarily known to be \u2018the\ntransaction value\u2019. <\/p>\n\n\n\n<ul><li><strong><em>Section 15 of the CGST Act, 2017<\/em><\/strong> contains provisions related to valuation of supply of goods or services made in different circumstances and to different persons.<\/li><li><strong><em>Section 15 (1)<\/em><\/strong> of the <strong><em>Central Goods and Services Act, 2017 (CGST Act)<\/em><\/strong> defines \u201cValuation of Supply of goods or services or both should be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier as well as the recipient of the supply are not related and the price is the sole consideration for the supply.\u201d It further states in sub-section (2) about the details of various inclusions and exclusions from the ambit of transaction value.<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/check-gst-registration-status\/\">Step by step guide on how to check GST Registration Status<\/a><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Who is a Principal?<\/h3>\n\n\n\n<p>As per the <strong><em>Section\n1 (88) of the Central Goods and Services Tax Act, 2017<\/em><\/strong>, it defines the\nterm \u201cprincipal\u201d as a person on whose behalf an agent carries on the business of\nsupply or receipt of goods or services or both.\u201d<\/p>\n\n\n\n<p>Common examples of\nthe principal-agent relationship can be hiring of a contractor to complete\nconstruction of any building by the Project owner. In such instance, the\nprincipal is the individual reaching for the service, while the agent is\nperforming the work.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Who is an Agent?<\/h3>\n\n\n\n<p>As per the <strong><em>Section\n1 (5) of the Central Goods and Services Tax Act, 2017<\/em><\/strong>, it defines agent\nas a person, including a factor, broker, commission agent, del credere agent,\nan auctioneer or any other merchant agent, who carries on the business of\nsupply or receipt of goods or services or both on behalf of any other.<\/p>\n\n\n\n<p>A DelCredere agency is a category of\nprincipal-agent relationship where the agent acts not only as a salesperson or\nbroker for the principal but also acts as a guarantor of credit extended to the\nbuyer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What do we understand by Principal and Agent Relationship?<\/h2>\n\n\n\n<p>Explanation of principal\n\u2013 agent relationship has been detailed in <strong><em>Schedule I of CGST Act, 2017 vide Circular\nNo. 57\/31\/2018-GST dated 04\/08\/2017. <\/em><\/strong>In terms of said Schedule I of the\nCentral Goods and Services Tax Act, 2017 (CGST Act), the supply of goods by an\nagent on behalf of the principal without consideration has been deemed to be a\nsupply.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Branches of any Supply under GST<\/h3>\n\n\n\n<p><strong><em>The two branches of any supply under GST are-<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Branches-of-any-Supply-under-GST.png\" alt=\"Branches of any Supply under GST\" class=\"wp-image-25035\" width=\"531\" height=\"356\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Branches-of-any-Supply-under-GST.png 985w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Branches-of-any-Supply-under-GST-300x202.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Branches-of-any-Supply-under-GST-768x516.png 768w\" sizes=\"(max-width: 531px) 100vw, 531px\" \/><\/figure><\/div>\n\n\n\n<h4 class=\"wp-block-heading\">Consideration<\/h4>\n\n\n\n<p>The consideration is not abiding in any such transaction, in which a transaction does not drop down within the scope of any supply. There are certain scenarios, as provided in <strong><em>Schedule I of the CGST Act.<\/em><\/strong> Supply of goods is stated as follows:-<\/p>\n\n\n\n<p><strong>\u201cSupply of Goods\u201d\u2014<\/strong><\/p>\n\n\n\n<ol><li>By a principal to his agent\nwhere the agent undertakes to supply such goods on behalf of the principal; or<\/li><li>By an agent to his principal\nwhere the agent undertakes to receive such goods on behalf of the principal.<\/li><\/ol>\n\n\n\n<p>It is well observed\nthat not all the activities and transaction between the principal and the agent\nand vice versa allocate within the scope of the specified entry.<\/p>\n\n\n\n<ul><li>Firstly, the supply of\nservices between the principal and the agent and vice versa is apart from the\nambit of the said entry, and would consequently require \u201cconsideration\u201d to\nconsider it as supply. This would be liable to final calculation of GST.<\/li><li>Secondly, the element recognized\nin the definition of \u201cagent\u201d, i.e., \u201csupply or receipt of goods on behalf of\nthe principal\u201d has been contracted in this entry.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">In the Course or\nFurtherance of Business<\/h4>\n\n\n\n<p><strong><em>Section 7 of CGST Act 2017<\/em><\/strong> defines scope of Valuation of Supply under GST. As per clause (a) of\nsub-section (1), supply includes all forms of supply of goods or services or\nboth made for a consideration in the course or furtherance of business.<\/p>\n\n\n\n<p>In Goods and Services\nTaxes law, the supply of goods, services and supplies made by principal to his\nagent or agent to his principal shall be liable to tax even any such\ntransactions does not contain any consideration for such supplies.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>For determining relationship would addresses few questions such as; whether invoice for further Valuation of supply of goods on Principal\u2019s behalf is issued by agent or not. Any provision of services from principal &#8211; agent and vice versa would fall within the Entry 3 as herein invoice for the supply is issued by agent. In scenario, when the invoice is issued by the agent to his customer in the name of the principal, such agent do not fall within the ambit and scope of Schedule I of the <em><strong>CGST Act<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/CGST\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>.<\/p>\n\n\n\n<p>When the goods are being secured by the agent on behalf of the principal, those will get invoiced in the name of the agent. The forthcoming provision of the said supplies and services by the agent to the principal would be covered by the provided entry in the Schedule I of the Central Goods and Services Tax Act, 2017. To get such more clearance in the topics of valuation of Supply under the regime of GST, you may please connect to our <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a> professional as soon as possible.<\/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\/apply-for-gst-registration-certificate-online\/\">How to apply for GST registration certificate online?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Goods and Service Tax (GST) brings and felicitate the concept of \u201cOne Nation One Tax\u201d under the economical regime of India. Under this particular, presently GST is charged on the \u2018Transaction Value\u2019. The transaction value refers to the price actually paid or payable for the supply of goods or services between un-related prices which [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":25034,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1475],"acf":{"service_id":"96"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":4233,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25024"}],"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\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=25024"}],"version-history":[{"count":11,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25024\/revisions"}],"predecessor-version":[{"id":25111,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/25024\/revisions\/25111"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/25034"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=25024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=25024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=25024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}