Hi,,
request help on the following issue.
one of my client is a wholesole distributor of honda bikes in the Distt.. firm constituted recently. earlier there was no such distributor in the distt. the bike sold directly from the distributor showrooms and also from sub dealer's showroom located at different small cities in the distt. as per system Billing can not be done by sub dealers for sale from sub dealer's showroom. sale bill (tax invoice)can only be raised by distributor only for sale from sub dealers display showroom.......
kindly guide me on following points....
1. whether billing process is correct? is it common in these type of case.
2. is it principal agent relationship. as on each sale of bike from sub dealer counter, they got commision.
3. how distributor will transfer bike... on which document.. is it branch transfer... means GST implication on such transfer... how this transaction will effect sub dealer in GST.
4. whether sub dealer are required to get register under GST. whether he is required to raise invoices for commission.
5. whether is it right to call them sub dealer or they are commission agent.
as RTO registration can only be done on the basis of distributors invoice..not of sub dealers invoices... also earlier when these sub dealers are purchasing bike from different distributor in different distt...when ther was no distributor in our distt... all purchase and sale are against tax invoice..which was totally illegal.and value of purcahse and sale counted in b/s not just commssion...also they werw taking vat credits and all..they have also taken limits from bank based on those b/s.... now if they only account for commision income...then there bank limit will effect...plssssssssss guide me...on this... i am unable to find ny solution...so that they could maintain their limits in bank...plsss help
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COMMISION AGENT -QUERY
Replies (1)
Valuation of Supply – Principal to Agent and Vice Versa
Any supply from a principal to an agent or vice versa is chargeable to GST. This rule will help determine the correct value of supply. Read more here
Updated on Jun 09, 2017 - 08:23:26 PM
Value of Supply of Goods Made or Received Through an Agent
The recently introduced GST valuation rules specifically cover situations where goods are supplied by the Principal to an agent or vice versa. Such supplies are chargeable under GST. In simple words, any supply from Principal to an agent or otherwise will attract GST and thus either of the parties need to refer to these valuation rules to avoid a dispute with tax administrative authorities.
Who is a Principal?
As per the definition provided in the GST law, the term “Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services, or both. For instance, a dealership store of an automobile company is an excellent example of Principal-Agent relationship.
Who is an Agent?
GST law defines an “Agent” as a person, including a factor, broker, commission agent, arhatia (term used in local markets) , 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.
*A del credere agency is a type of principal-agent relationship wherein the agent acts not only as a salesperson or broker for the principal but also as a guarantor of credit extended to the buyer.
Any supply between such parties is liable for Goods and Services Tax and thus the valuation rule is used to determine correct tax liability. Also, such agent and his principal shall, jointly and severally, be liable to pay the tax on such goods or service. As per the rule, value of supply shall be,
1. Either of:
a) Open Market Value, or;
b) Ninety percent (90%) of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where goods are intended for further supply by the said recipient.
Example – Let’s assume that the principal Mr. X, supplies groundnuts to his agent. The agent Mr. Y, supplies groundnuts of like kind and quality in subsequent supplies at a price of Rs. 5,000 per quintal on the day of supply. Another independent supplier Mr. Z, is supplying groundnuts of like kind and quality to the said agent at the price of Rs. 4,550 per quintal. The value of the supply made by the principal Mr. X, shall therefore be Rs. 4,550 per quintal (the open market value of groundnuts) or where he exercises the option the value shall be 90% of Rs. 5,000 i.e. is Rs. 4,500 per quintal.
2. In case if it can not be determined on the basis of the rule above, the value shall be determined on the basis of Cost Method or Residual Method.
Any supply from a principal to an agent or vice versa is chargeable to GST. This rule will help determine the correct value of supply. Read more here
Updated on Jun 09, 2017 - 08:23:26 PM
Value of Supply of Goods Made or Received Through an Agent
The recently introduced GST valuation rules specifically cover situations where goods are supplied by the Principal to an agent or vice versa. Such supplies are chargeable under GST. In simple words, any supply from Principal to an agent or otherwise will attract GST and thus either of the parties need to refer to these valuation rules to avoid a dispute with tax administrative authorities.
Who is a Principal?
As per the definition provided in the GST law, the term “Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services, or both. For instance, a dealership store of an automobile company is an excellent example of Principal-Agent relationship.
Who is an Agent?
GST law defines an “Agent” as a person, including a factor, broker, commission agent, arhatia (term used in local markets) , 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.
*A del credere agency is a type of principal-agent relationship wherein the agent acts not only as a salesperson or broker for the principal but also as a guarantor of credit extended to the buyer.
Any supply between such parties is liable for Goods and Services Tax and thus the valuation rule is used to determine correct tax liability. Also, such agent and his principal shall, jointly and severally, be liable to pay the tax on such goods or service. As per the rule, value of supply shall be,
1. Either of:
a) Open Market Value, or;
b) Ninety percent (90%) of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where goods are intended for further supply by the said recipient.
Example – Let’s assume that the principal Mr. X, supplies groundnuts to his agent. The agent Mr. Y, supplies groundnuts of like kind and quality in subsequent supplies at a price of Rs. 5,000 per quintal on the day of supply. Another independent supplier Mr. Z, is supplying groundnuts of like kind and quality to the said agent at the price of Rs. 4,550 per quintal. The value of the supply made by the principal Mr. X, shall therefore be Rs. 4,550 per quintal (the open market value of groundnuts) or where he exercises the option the value shall be 90% of Rs. 5,000 i.e. is Rs. 4,500 per quintal.
2. In case if it can not be determined on the basis of the rule above, the value shall be determined on the basis of Cost Method or Residual Method.
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