TMI BlogScope of Principal-agent relationship in the context of Schedule I of the CGST Act -regarding.X X X X Extracts X X X X X X X X Extracts X X X X ..... ule I of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act ), the supply of goods by an agent on behalf of the principal without consideration has been deemed to be a supply. In this connection, various representations have been received regarding the scope and ambit of the principal-agent relationship under GST. In order to clarify some of the issues and to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board, in exercise of its powers conferred under section 168 (1) of the CGST Act hereby clarifies the issues in the succeeding paras. 2. As per section 182 of the Indian Contract Act, 1872, an agent is a person employed to do any act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the two limbs of any supply under GST are consideration and in the course or furtherance of business . Where the consideration is not extant in a transaction, such a transaction does not fall within the ambit of supply. But, in certain scenarios, as elucidated in Schedule I of the CGST Act, the key element of consideration is not required to be present for treating certain activities as supply. One such activity which has been detailed in para 3 of Schedule I (hereinafter referred to as the said entry ) is reproduced hereunder: 3. Supply of goods- (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule I of the CGST Act . Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal. 8. Looking at the convergence point between the character of the agent under both the CGST Act and the Indian Contract Act, 1872 , the following scenarios are discussed: Scenario 1 Mr. A appoints Mr. B to procure certain go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng services, but is also supplying the painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. A. This scenario is covered under Schedule I. A similar situation can exist in case of supply of goods as well where the C F agent or commission agent takes possession of the goods from the principal and issues the invoice in his own name. In such cases, the C F/commission agent is an agent of the principal for the supply of goods in terms of Schedule I. The disclosure or non-disclosure of the name of the principal is immaterial in such situations. Scenario 4 Mr A sells agricultural produce by utilizing the services of Mr B who is a commission agent as per the Agricultura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce from GST. Thus, the services‟ provided by the commission agent for sale or purchase of agricultural produce is exempted. Such commission agents (even when they qualify as agent under Schedule I) are not liable to be registered according to sub-clause (a) of sub-section (1) of section 23 of the CGST Act , if the supply of the agricultural produce, and /or other goods or services supplied by them are not liable to tax or wholly exempt under GST. However, in cases where the supply of agricultural produce is not exempted and liable to tax, such commission agent shall be liable for compulsory registration under sub-section (vii) of section 24 of the CGST Act. 10. It is requested that suitable trade notices may be issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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