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Concept of Pure Agent Under GST and GST on Reimbursement of the Expenses

Who is An Agent

An agent is defined by the GST Act as a person who deals with the supply or receipt of goods or services on behalf of another individual. This covers all kinds of mercantile agents, including factor, broker, commission agent, arhatia, del credere agent, auctioneer, and so on.

Who is Pure Agent

Someone who supplies to the recipient while also paying costs on the recipient's behalf for another supply is known as a pure agent. Without increasing the value of their supply, the pure agent then demands payment from the primary supply's recipient for these costs. The primary service supplier and the service user have a principal-to-principal relationship; but, when it comes to auxiliary services, their relationship is that of a pure agent.

Lets take the example of an Clearing and Forward Agent (CHA) who does various work on behalf of the importer to get the materials cleared from port and also to reach the said material to factory of importer. Apart from service of clearing the goods from the port , CHA's work do not include providing logistic service , however as instructed by importer , CHA will arrange transporter , pay for the logistic bill and than claim reimbursement of logistic bills from importer on actual basis. Thus here the service of CHA for arranging logistic service is of Pure Agent.

Relevance of Pure Agent under GST

The concept has been carried over into the GST from the previous Service Tax (Determination of Value) Rules of 2006.

A "pure agent" is defined by the CGST Rules of 2017 as someone who:

(a) enters into a contract with the recipient of the supply to act as their pure agent and incur costs or expenditures while supplying goods or services, or both;

(b) has no intention of holding or already holds the title to the goods or services procured or provided as a pure agent of the recipient of the supply; and

(c) does not use the goods or services procured for their interest.

(d) Gets paid for the supply they arrange on their behalf in addition to the amount they spend on acquiring these items or services.

It is crucial to remember that a pure agent does not utilize the products or services he has obtained for his benefit; this fact must be ascertained from the contract's provisions. 

Assume that the items were cleared and delivered to the importer at the predetermined cost. The Customs Broker would not be regarded as a pure agent for the transport services obtained in this instance since they would be using the services for their benefit (the contract calls for them to convey the goods to the importer's location).

Exclusion from Value of Supply

  1. If expenses have been incurred as a pure agent, than saif expense reimbursed on actuals must be excluded when calculating the value of a supply for GST purposes. Some requirements must be fulfilled for an agent to be deemed pure. According to the CGST Regulations, expenses incurred as pure agents are not included in determining the supply's worth or the total turnover. This exclusion, however, is only feasible if the supplier meets all requirements in every instance. The supplier must fulfill the following requirements in addition to those needed to be regarded as a pure agent to be qualified for exclusion from the value:

  2. When paying a third party on behalf of the recipient of the supply, the supplier acts as the recipient's pure agent;

  3. The payment made by the pure agent on the recipient's behalf is separately noted in the invoice that the pure agent issues to the recipient of service; and

  4. The supplies that the pure agent purchases from the third party in his capacity as the recipient's pure agent are in addition to the services he provides on his behalf.

The following example can help you better understand the concept:

• The legal work associated with Company B's incorporation is being handled by a corporate services firm.

• In addition to the service fees, Company B pays the approval and registration fees to the Registrar of Companies, which are recouped by the corporate services firm.

• Company B must pay the Registrar's fees for the company to be registered and have its name approved.

• As a result, the corporate services firm's recovery of such costs is a reimbursement rather than a portion of the value of the supply they provided to Company B.

• The corporate services firm is just serving as a pure agent in paying those fees.

Is GST Applicable on Reimbursement of Expenses

Reimbursement of expenses can be classified into two types :

Incidental expenses that are spend by the supplier during providing goods or services. Incedential expenses includes commission, packing, travelling expenses, etc., and form a part of the supply value. These expenses are usually incurred before or at the time of delivery of the goods or supply of the services. GST will be applicable on this expenses

Expenses that the supplier incurs as a pure agent. Expenses that are very specifically paid by the supplier on behalf of the recipient but do not form a part of the supply value. Examples include registration fees or taxes paid to the government, transportation charges paid to a third-party transporter that the recipient has authorised the supplier to incur, etc.  On this expenses GST is not applicable



For businesses, the idea of a pure agent is essential since it has a direct impact on the cost of taxable services and the quantity of GST applied to a specific supplier. It also affects the supplier's overall turnover, which affects the registration threshold. To guarantee that only the true value of the services rendered is subject to GST when functioning as a pure agent, it is crucial to make sure that the requirements for such a pure agent, as well as the extra conditions offered in the CGST Rules, are fulfilled.


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