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TMI BlogScope of Principal-agent relationship in the context of Schedule I of the KGST ActX X X X Extracts X X X X X X X X Extracts X X X X ..... 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 law. 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, in exercise of powers conferred under section 168 (1) of the KGST Act, the issues are hereby clarified in the succeeding paras. 2. As per section 182 of the Indian Contract Act, 1872 (Central Act 9 of 1872), an "agent" is a person employed to do any act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the "principal". As de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 KGST 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 undertakes to receive such goods on behalf of the principal. 6. Here also, it is worth noticing that all the activities between the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST 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 KGST Act and the Indian Contract Act, 1872, the following scenarios are discussed: Scenario 1 Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half 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 Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify 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 KGST 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. Further, according to clause (vii) of section 24 of the KGST Act, a person is liable for mandatory registration if he makes taxable supply of goods or services or both on behalf of other taxable persons. Accordingly, the requirement of compulsory registration for commission agent, under the said clause shall arise when both the following conditions are satisfied, namely: - (a) the principal should be a taxable person; and (b) the supplies made by the commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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