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
An agent can be appointed for performing any act on behalf of the principal which may or may not have the potential for representation on behalf of the principal.
The term 'agent' has been defined as per sec 2(5) of the CGST Act as follows:
'Agent' means a person, including a factor, broker, commission agent, arhatia, del credere 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.
The two key elements emerge from above definition of agent is that
- The various activities being carried out by the person concerned in the principal-agent relationship; and
- The supply or receipt of goods or services has to be undertaken by the agent on behalf of the principal.
The two crucial component of any supply under GST are:
'Consideration' and 'In the course or furtherance of business'.
Where the consideration is not existing in a transaction, such a transaction will not be supply except Schedule I of the CGST Act.
Relevant Extract - Para 3 of Schedule I is reproduced hereunder:
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.
Important Point to be noted that this para is applicable for supply of goods (not for supply of service)
Components for determining relationship under GST would be :
The invoice for the further supply of goods on behalf of the principal is being issued by the agent or not is an important factor to decide the applicability of para 3 of Schedule I
Where the invoice for further supply is being issued by the agent in his name then, agent would fall in the para 3 of Schedule I.
Where the invoice is issued by the 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.
Further when 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.
The point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.
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 the goods and issue the invoice directly to Mr. A. In this scenario, Mr. B is only acting as the procurement agent, and has in no way involved himself in the supply or receipt of the goods. Hence, in accordance with the provisions of this Act, Mr.B is not an agent of Mr. A for supply of goods in terms of Schedule I.
M/s XYZ, a banking company, appoints Mr. B (auctioneer) to auction certain goods. The auctioneer arranges for the auction and identifies the potential bidders. The highest bid is accepted and the goods are sold to the highest bidder by M/s XYZ. The invoice for the supply of the goods is issued by M/s XYZ to the successful bidder. In this scenario, the auctioneer is merely providing the auctioneering services with no role played in the supply of the goods. Even in this scenario, Mr.B is not an agent of M/s XYZ for the supply of goods in terms of Schedule I.
Mr. A, an artist, appoints M/s B (auctioneer) to auction his painting. M/s B arranges for the auction and identifies the potential bidders. The highest bid is accepted and the painting is sold to the highest bidder. The invoice for the supply of the painting is issued by M/s B on the behalf of Mr. A but in his own name and the painting is delivered to the successful bidder. In this scenario, M/s B is not merely providing auctioneering 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.
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 charges a commission from Mr. A.
As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf of his principal, or facilitates buying and selling of agricultural produce on behalf of his principal and receives, by way of remuneration, a commission or percentage upon the amount involved in such transaction.
In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under Schedule I. However, in cases where the invoice is issued directly by Mr. A to the buyer, the commission agent (Mr. B) doesn't fall under the category of agent covered under Schedule I.
CRUX OF ABOVE SCENARIO’S
In scenario 1 and scenario 2
Mr. B shall not be liable to obtain registration in terms of clause (vii) of section 24 of the CGST Act. He, however, would be liable for registration if his aggregate turnover of supply of taxable services exceeds the threshold specified in sub-section (1) of section 22 of the CGST Act.
In scenario 3
M/s B shall be liable for compulsory registration in terms of the clause (vii) of section 24 of the CGST Act.
In scenario 4 (In respect of commission agents)
Notification No. 12/2017 Central Tax (Rate) dated 24.06.2017 has exempted 'services by any APMC or board or services provided by the commission agents for sale or purchase of agricultural produce' from GST.
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.
Note: 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.
Source: Circular No. 57/31/2018-GST Dated the 4th September, 2018