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GST Registration for Agents & Taxability of Pure Agent


GST Registration for Agents & Taxability of Pure Agent

In GST, special provisions have been provided for agents. To begin, GST registration is mandatory for agents, irrespective of annual aggregate turnover in a financial year. In this article, we look at GST registration for agents and related provisions.

Agents Definition under the GST Act

The GST Act defines an Agent as a person including a factor, broker, commission agent, agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.

GST Registration

GST registration is mandatory for all agents. The GST Act states that any persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise must be registered under GST.

Is GST applicable for Agents and Brokers?

Yes, GST is applicable for agents and brokers. However, to understand the applicability and supply on which GST is applicable, we first understand the nature of work of a pure agent. A pure agent is someone who, while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his supply) for such supplies from the recipient of the main supply.

For example, a business approaches a Custom Broker. The business requires customs clearance for an import consignment. To complete the task, the Customs Broker engages the services of a transporter for delivery of goods to the business. The customs broker pays the transporter and claims reimbursement from the business.

In this scenario, the main service provided is that of customs clearance, while an ancillary service was provided to complete the main task for which reimbursement was claimed. In such a case, the part of the value delivered should only be that of the customs clearance and should not include transportation.

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Pure Agents under GST

The following conditions must be present to classify someone as a pure agent:

  • Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both
  • Neither intends to hold nor holds any title to the goods or services or both so procured or provided as a pure agent of the recipient of the supply
  • Does not use for his interest such goods or services so procured
  • Receives only the actual amount incurred to procure such goods or services in addition to the amount received for the supply he provides on his account.

Taxability of Pure Agents

While calculating the value of taxable supply made by a pure agent, the expenditure incurred on behalf of the recipient of services should not be taken into account. Further, the valuation rules provide that expenditure incurred as a pure agent, will be excluded from the value of supply, and thus also from aggregate turnover. However, such exclusion of expenditure incurred as pure agent is possible only and only if all the conditions required to be considered as a pure agent and further conditions stipulated in the rules are satisfied by the supplier in each case.

To exclude the value of expenditure incurred from the taxable supply, the following conditions must be present:

  • The supplier acts as a pure agent of the recipient of the supply when he makes payment to the third party on authorization by such recipient.
  • The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service.
  • The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his account.


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