GST Valuation in case of Pure Agent – How pure agent services are treated under GST Valuation Rules

by Paras Mehra 4.49K

1.0 Introduction                                   

As per the basic rule of valuation, the direct cost related to end service is often included in the value of services and charged from the customer. Further, on that value GST is calculated and paid to the government.

However, pure agent is the different case altogether. Any services provided as pure agent are not included in the ultimate value of the services and hence no GST is charged on that service.

Let us understand who is a pure agent

 

2.0 Meaning of Pure Agent under GST rules

“Pure agent” means a person who–

 

Example: Suppose Mr. A availed a construction service from Mr. B. During the construction period, Mr. A request Mr. B to help him find a shop to buy the best furniture. Mr. B helped him and purchased the furniture from the any company and handed over the bill to Mr. A. Mr. A paid Mr. B actual sum payable for furniture.

In this case, Mr. B is also acting as pure agent.

 

3.0 Conditions for excluding value of pure agent services

 

Expenditure or costs incurred by the supplier as a pure agent of the recipient of service shall be excluded from the value from the value of taxable supply if all the following conditions are satisfied which are as follows:

 

Example: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to Registrar of the Companies. The fees charged by the Registrar of the companies registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

 

4.0 Conclusion

If you are still confused, then drop your query on info@hubco.in.

 

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