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 ] 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, Note - The supply of goods by agent on behalf of the principal without consideration has been deemed to be supply. [section 7(1)(c) of CGST Act.] Supply of goods between principal and agent will be subject to GST, even if there is no consideration-para 3 of Schedule I of CGST Act. 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. Important Notification Circulars Clarification regarding scope and ambit of the Principal-agent relationship in the context of Schedule I of the CGST Act . [ Circular No. 57/31/2018-GST dated 01.09.2018 ] Para 6. Here also, it is worth noticing that all the activities between the principal and the agent and vice versa do not fall within the scope of the said entry. Firstly, the supply of services between the principal and the agent and vice versa is outside the ambit of the said entry, and would therefore require consideration to consider it as supply and thus, be liable to GST. Secondly, the element identified in the definition of agent , i.e., supply or receipt of goods on behalf of the principal has been retained in this entry. Para 8. Looking at the convergence point between the character of the agent under both the CGST Act and the Indian Contract Act, 1872 , the following scenarios 1 to 4 are discussed under the Circular. Para 9. Futher, according to section 24(vii) of the CGST Act , a person is liable for mandatory registration if he makes taxable supply of goods or services or both on behalf of other taxable persons. Accordingly, the requirement of compulsory registration for commission agent, under the said clause shall arise when both the following conditions are satisfied, namely: - (a) the principal should be a taxable person; and (b) the supplies made by the commission agent should be taxable. Generally, a commission agent under APMC Act makes supplies on behalf of an agriculturist. Further, as per provisions of section 23(1)(b) of the CGST Act an agriculturist who supplies produce out of cultivation of land is not liable for registration and therefore does not fall within the ambit of the term taxable person . Thus a commission agent who is making supplies on behalf of such an agriculturist, who is not a taxable person, is not liable for compulsory registration under section 24(vii) of the CGST Act . However, where a commission agent is liable to pay tax under reverse charge, such an agent will be required to get registered compulsorily under section 24 (iii) of the CGST Act . Clarification regarding scope of principal and agent relationship under Schedule I of CGST Act, 2017 in the context of del-credere agent ( DCA ). [ Circular No. 73/47/2018-GST dated 05.11.2018 ] Whether a DCA falls under the ambit of agent under Para 3 of Schedule I of the CGST Act ? Whether the temporary short-term transaction based loan extended by the DCA to the recipient (buyer), for which interest is charged by the DCA, is to be included in the value of goods being supplied by the supplier (principal) where DCA is not an agent under Para 3 of Schedule I of the CGST Act ? Where DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the value of goods being supplied, whether the interest will form a part of the value of supply of goods also or not? 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.