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TMI BlogWhether Pure Agent and Intermediary are the same under Service tax lawsX X X X Extracts X X X X X X X X Extracts X X X X ..... Whether Pure Agent and Intermediary are the same under Service tax laws X X X X Extracts X X X X X X X X Extracts X X X X ..... let me know whether both are mutually exclusive or we can use it simultaneously at respective places. What i mean is can we draft an agreement between two parties where all the essence of both Pure agent and Intermediary are present and revenue authorities cannot deny either of them. Reply By Ganeshan Kalyani: The Reply: In my view, pure agent would not add any profit element in the service that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he carry out on behalf of the receiver of service. The intermediary is a person who pay for the services which the main service receiver would have to be incurred. The amount an intermediary charge may have Profit element. Reply By Rajagopalan Ranganathan: The Reply: Sir, As per Explanation : 1 of sub-rule (2) of rule 5 of Service Tax (Determination of Value) Rules, 2006, "pure agent&qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot; means a person who- (a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service; (b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service; (c) does not use such goods or services so procured; and (d) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceives only the actual amount incurred to procure such goods or services. An 'intermediary' means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods on his account. Therefore as opined by Shri Ganeasn Kalyaniji, a pure agent cannot make profit out of dealings he had with third party on behalf of the receiver of the service whereas an intermediary is acting on behalf of the service receiver/provider on commission basis which includes his profit element. Reply By YAGAY AND SUN: The Reply: There is a thin line of difference, which differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entiates between the Pure Agent and the Intermediaries, and it is the line of profitability. Reply By Ganeshan Kalyani: The Reply: Though the difference is clear the tough part is to convince the audit party. The documentation is utmost important. Reply By YAGAY AND SUN: The Reply: Actually the nature of transaction and the terms & Condition of the PO would fall under the category of relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents. Reply By Ganeshan Kalyani: The Reply: Exactly, but more than PO, SRN is valid and that actuall bills /invoice incurred by pure agent and claim statement submitted by pure agent shoudl tie up in monetary terms. Reply By YAGAY AND SUN: The Reply: PO or SO are the primary documents which enumerates that what can be paid by the pure agent on behalf of the principal, rest are the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary documents.Hence, PO/SO are important documents as these are also demanded by the Auditors at the time of conducting audits. Reply By Ganeshan Kalyani: The Reply: PO may be for, say 500 quantity , but SRN (Service Receipt Note) would be for 490 quantity I.e. actual quantity receipt. Payment is made on actual basis and not on PO basis. Thus SRN and actual bills are essential. Reply By YAGAY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AND SUN: The Reply: Along with PO we have also mentioned SO (Services Order) which is further known as contract/agreement/MOUs. In the court of law, judge do always ask for PO/SO/Contract/agreement/MOUs, they never demand for any SRN. Reply By Ganeshan Kalyani: The Reply: Agreed , agreement etc are to start the work or the basis of work. But measurement of receipt of actual work is done on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of SRN. I mean to say if pure agent shows PO of service worth 500 rupees whereas he got bill of only 490 rupees based on actual transaction. Then in this case whether service receiver books and service provider book will match. NO. Then how can one justify then it was pure agent job. For substantiating pure agent work the amount should be actual . Actual work is know on SRN basis as like GRN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in goods transaction. Reply By YAGAY AND SUN: The Reply: In any case there would be not tax on either on ₹ 500/- or ₹ 490/- SRN are for making payments. However, no organisation issue any SRN. They just approve the bill and pay. Reply By Ganeshan Kalyani: The Reply: SRN is not issued . It is internal document like GRN. Based on SRN payment is done. Reply By YAGAY AND SUN: The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply: In our earlier discussions and by submitting the Case Laws, it was proved and it is now settled legal position that GRN are not mandatory, so the SRN. Reply By Ganeshan Kalyani: The Reply: At the end of the day if one can substantiate that payment made to pure agent is exactly the same amount that the pure agent paid to service provider, then there is no service tax implication. Documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion may differ. X X X X Extracts X X X X X X X X Extracts X X X X
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