We have started a RTP series on GST in MCQ form where we will post MCQs along with detailed Explanations along with additional questions surrounding the concepts asked in RTP for GST CA Final issued for May 2024.
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Concept of Pure Agent
Facts
The company obtained services of Mr. Y (based in Rajasthan), who is providing agency services for payment of annual road tax payable to the Government for the vehicles owned and operated by the company. Mr. Y issued an invoice amounting to Rs. 10,00,000 on the head office. Such amount includes Rs. 9,50,000 as amount of road tax paid on actual basis and is indicated separately in the invoice and Rs. 50,000 as fee of Mr. Y for said services.
Question: The total amount payable to Mr. Y including GST as applicable is ?
Option:
(a) Rs.10,00,000
(b) Rs.11,80,000
(c) Rs.11,71,000
(d) Rs.10,09,000
Answer: Rs.10,09,000 (For Explanation, please refer Next Section)
Additional Qns: A CA Firm charges Rs. 1,00,000 as consultancy Fee and Rs. 10,000 as Travelling & Daily Allowances. GST Needs to be discharged on
(a) Rs. 1,00,000
(b) Rs. 1,10,000
Answer: Rs.1,10,000
Additional Qns: If this Rs. 10,000 is on account of Income Tax Paid by the CA Firm on behalf of the Taxpayer.
Answer: Rs.1,00,000
Additional Qns: In a Mall, Mall Owner collects electricity charges of Rs.10,000 billed separately (not on actual basis) from the tenants in addition to Rent of Rs.1,00,000. GST Needs to be be paid on?
Answer: Rs.1,10,000
Additional Qns: In a Mall, Mall Owner collects electricity charges of Rs.10,000 on actual basis (i.e. same amount that is being charged by State Electricity Board) from the tenants in addition to Rent of Rs.1,00,000. GST Needs to be be paid on?
Answer: Rs.1,00,000
Explanations
As a General Rule, GST needs to be paid on the Gross Value charged for supply of Goods & Service except for exclusions as provided in Section-15 like for discount etc. or some specific valuation rules like for insurance has been notified.
However, there is a general exception given in Rule 33 (governed by section 15(5)) where it has been prescribed that if any amount has been recovered by the Supplier from the Recipient as Pure-Agent subject to conditions prescribed therein, it will not be part of the Value chargeable to GST.
Rule-33 (Value of supply of services in case of pure agent.-
Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,- ( i ) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation . - For the purposes of this rule, the expression "pure agent" means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration (given in Rule itself) . - Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A' s recovery of such expenses is a disbursement and not part of the value of supply made by A to B. |
In the case of CA Firm, since conditions of Pure-Agent is not satisfied (like Railway/Air Tickets are purchased in the Name of CA Firm), it needs to discharge GST on Gross Value.
Further, in case of Electricity Charges, it has been clarified by the Circular 206/18/2023-GST dated 31st October, 2023 that where electricity charges (not on actual basis) are collected along with Rent, GST needs to be paid on Gross Value considering it is a composite supply where renting is a principle supply even though Electricity is a NIL Rated Supply as per N.No. 2/2017.
However, where electricity charges are recovered on actual basis from the Tenants , Resident Welfare Associations (RWAs), Real Estate Developers etc. it will not form part of Value being a Pure-Agent.
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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.