REGARDING APPLICABILITY OF PURE AGENT SERVICES UNDER GST
This query is : Resolved
03 July 2025
If Mr. X has paid expenses of Rs. 1,00,000 on behalf of client as rent expenses and he has received only Rs. 80,000 as reimbursement then whether such Amount received would form part of turnover ?
And whether E-invoice would be applicable on such income?
And whether E-invoice would be applicable on such income?
12 August 2025
1. Is the reimbursement part of turnover?
If Mr. X acts as a pure agent of the client, then the amount reimbursed to him (whether Rs. 80,000 or full Rs. 1,00,000) does NOT form part of his taxable turnover.
Pure Agent means Mr. X incurs expenses on behalf of the client, where the client directly benefits, and Mr. X charges only the actual amount spent.
Conditions for Pure Agent under GST (Section 17(5)(h)):
Expense is incurred by Mr. X as agent of the client.
The amount charged is only the actual amount spent.
The payment is specifically incurred as a pure agent on behalf of the recipient of service (client).
The expense is separately indicated in the invoice.
Since reimbursement is Rs. 80,000 and actual expense is Rs. 1,00,000, Mr. X has not recovered the full amount; hence, only the reimbursed amount (80,000) can be considered.
The unrecovered Rs. 20,000 is a business loss to Mr. X and is part of his income, but not part of reimbursement turnover.
2. Applicability of E-invoice on such income?
E-invoicing is mandatory for B2B invoices where turnover exceeds prescribed threshold (currently Rs. 20 crore per annum) and the invoice value exceeds Rs. 50,000.
Since the reimbursed amount (Rs. 80,000) is being charged to the client, and if Mr. X is registered and crosses turnover limit, he must issue an invoice for Rs. 80,000.
The invoice should clearly mention the amount reimbursed as pure agent expenses.
The invoice for this amount would require e-invoicing if applicable as per turnover and invoice value limits.
If Mr. X acts as a pure agent of the client, then the amount reimbursed to him (whether Rs. 80,000 or full Rs. 1,00,000) does NOT form part of his taxable turnover.
Pure Agent means Mr. X incurs expenses on behalf of the client, where the client directly benefits, and Mr. X charges only the actual amount spent.
Conditions for Pure Agent under GST (Section 17(5)(h)):
Expense is incurred by Mr. X as agent of the client.
The amount charged is only the actual amount spent.
The payment is specifically incurred as a pure agent on behalf of the recipient of service (client).
The expense is separately indicated in the invoice.
Since reimbursement is Rs. 80,000 and actual expense is Rs. 1,00,000, Mr. X has not recovered the full amount; hence, only the reimbursed amount (80,000) can be considered.
The unrecovered Rs. 20,000 is a business loss to Mr. X and is part of his income, but not part of reimbursement turnover.
2. Applicability of E-invoice on such income?
E-invoicing is mandatory for B2B invoices where turnover exceeds prescribed threshold (currently Rs. 20 crore per annum) and the invoice value exceeds Rs. 50,000.
Since the reimbursed amount (Rs. 80,000) is being charged to the client, and if Mr. X is registered and crosses turnover limit, he must issue an invoice for Rs. 80,000.
The invoice should clearly mention the amount reimbursed as pure agent expenses.
The invoice for this amount would require e-invoicing if applicable as per turnover and invoice value limits.
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