Supply Includes Without Consideration - Para 3 of Schedule I Read with Section 7(1)(c) - GST Ready Reckoner - GST

Supply Without Consideration shall be considered as Supply - Schedule I - As per section 7(1)(c) , the activities specified in Schedule I, made or agreed to be made without a consideration shall be considered as supply. Accordingly, Schedule I to the CGST Act contain the certain activities or transaction specified in, made or agreed to be made without a consideration, have also been include in the definition of Supply . As per Para 3 - Transaction between principal and agent [ Para 3 ] The supply of goods by agent on behalf of the principal without consideration has been deemed to be supply. [sec. 7(1)(c) of CGST Act.] Supply of goods- by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal, will be subject to GST, even if there is no consideration-para 3 of Schedule I of CGST Act. Note - Supply of services between principal and agent not fall under this para 3 of Schedule I of CGST Act. Registration Provision The agent is mandatorily required irrespective of their turnover. It may noted that as per section 24(vii) of the CGST Act, person who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise, are not eligible for the threshold limit of INR 40 Lakh/10 Lakh/ 20 Lakh for registration. There is misunderstanding that all commission agents required mandatory registration under GST irrespective of his commission income(i.e even if income from commission is below 20/10 lakhs per annum). It is Clarified in the Circular No. 57/31/2018-GST Dated 04 September 2018 . Now it has been clarified that such registration is required only by C F agents who stock and sale goods on behalf of principal. In case registration is not required by ordinarily commission agents who do not deal in goods or services themselves, if their annual turnover is less than 20/10 lakhs. In case Commission agent of agricultural produce, the commission agent is not a taxable person and agriculturist is also not a taxable person.. hence, the commission agent does not require registration under GST. However, if he is liable to pay GST under reverse charge, he will be liable to be registered u/s 24(iii) of CGST Act. CASE LAW M/S. Bhaktawar Mal Kamra Sons ( 2019 (11) TMI 1715 - AAAR , Haryana ) The commission agent is liable for registration since they qualify as agents under schedule I subject to the provisions of Section 22(1) of the Acts ibid where the aggregate turnover of supply of exempted as well as taxable goods or services exceeds the threshold limit and that such commission agents shall also be liable for compulsory registration as per provisions of Section 24 (vii) of the Acts ibid and they shall be liable to charge tax on RCM basis on the supply of raw cotton. In order to determine whether a particular principal and agent are fall within ambit of para 3 of Schedule I of CGST Act. (1) Where agent shall invoice issue, for the further supply invoice Invoice issued by agent in his name then agent shall be covered under para 3, Schedule I, Example 3:- Mr. Anil , an artist, appoints M/s Ram (auctioneer) to auction his painting. M/s Ram 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 Ram on the behalf of Mr. Anil but in his own name and the painting is delivered to the successful bidder. In this scenario, M/s Ram is not merely providing auctioneering services, but is also supplying the painting on behalf of Mr. Anil to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. Anil. This scenario is covered under Schedule I Invoice in his name of principal then agent shall not be covered under para 3, Schedule I, Example: - Mr. Ramesh appoints Mr. Bablu to procure certain goods from the market. Mr. Bablu identifies various suppliers who can provide the goods as desired by Mr. Ramesh, and asks the supplier (Mr. Chaman) to send the goods and issue the invoice directly to Mr. Ramesh. In this scenario, Mr. Bablu 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. Bablu is not an agent of Mr. Ramesh for supply of goods in terms of Schedule I. 2) where goods being procured by agent on behalf of principal, invoice : - Invoice issued in the name of agent shall be covered under para 3, Schedule I, Example :- A C F agent or commission agent take possession of goods on behalf of principal and issue of invoice in his name . Such case , the C F commission agent is a agent of principal for the supply of goods in term para 3 of schedule 1. The disclosure or non-disclosure of the name of principal is immaterial in such situation. Invoice issued in the name of principal then agent shall not be covered under para 3, Schedule I. Example:- 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. The scope and ambit of principal and agent relationship under GST in the context of del-credere agent (DCA) was clarified in Circular No. 73/47/2018, 05 Nov. 2018. Del credere agent is similar to commission agent the only difference is that he guarantees payment to supplier of goods or services, if recipient does not pay. in some cases the del credere agent himself pays to supplier and then recovers amount from recipient. In some cases the del credere agent advances short term loan to buyer and then buyer pays to the supplier. Thus, the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry. However, it may be noted that in cases 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.