Scope of Principal-agent relationship in the context of Schedule I of the CGST Act.

Circular No.: 57/31/2018-GST
Date of Circular: 4th September 2018
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 7 and Schedule I, Entry 3: Supply between principal and agent
  • Section 24(vii): Compulsory registration for agents
  • Section 168(1): Power to issue instructions
• Indian Contract Act, 1872:
  • Section 182: Definition of principal and agent

Summary of Circular:

This circular clarifies the scope of principal-agent relationships under Schedule I of the CGST Act, especially concerning supply without consideration, and lays down objective criteria to determine whether a supply falls under the said schedule.

1. Definition and Key Elements of Agent:
   • An agent (per CGST Act and Indian Contract Act) is someone who acts on behalf of a principal to supply or receive goods.
   • Key criteria:
     • The representative character of the agent, and
     • The authority to supply or receive goods on behalf of the principal.

2. Applicability of Schedule I Entry 3 (Supply without consideration):
   • Entry 3 applies only if:
     • The agent undertakes supply or receipt of goods on behalf of the principal.
     • The agent issues invoice in his own name, not in the name of the principal.
   • If the agent issues invoice in the name of the principal, the transaction does not fall under Schedule I.
3. Representative Scenarios Explained:
   • Scenario 1: Procurement agent arranges purchase for principal, but invoice is issued to principal — not covered under Schedule I.
   • Scenario 2: Auctioneer arranges sale, but principal issues invoice — not covered under Schedule I.
   • Scenario 3: Auctioneer sells artwork and issues invoice in own name — covered under Schedule I.
   • Scenario 4: APMC commission agent sells agricultural produce:
     • If agent issues invoice — covered under Schedule I.
     • If principal issues invoice — not covered under Schedule I.

4. Registration Liability:
   • Agents not covered under Schedule I must register only if turnover exceeds the threshold (Section 22).
   • Agents covered under Schedule I must register compulsorily under Section 24(vii).
   • However, APMC commission agents dealing in exempt agricultural produce are not liable to register under Section 23(1)(a).

Source: Circular No.: 57/31/2018-GST