Pure Agent in GST

Pure Agent in GST

Definition of Agent:

Section 2(5) defines “agent” as an individual , including an element , broker, commission agent, arhatia, del credere agent, auctioneer, or the other mercantile agent, by whatever name known, who engages within the supply or document of goods or services or both on behalf of another.

Who is Pure Agent:

Pure Agent may be a person who, while making a supply to the recipient, also receives and incurs expenditures on another supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the worth of his own supply) from the recipient of the main supply. The provider of service and recipient of service have a principal-to-principal relationship with reference to the primary service, but a pure agency relationship with reference to supplementary services. the subsequent illustration clarifies the concept of a Pure Agent:

A is an importer, while B may be a customs broker. An approaches B regarding customs clearance work for an import shipment. The clearance of the import shipment and its delivery to A would also necessitate the services of a transporter. Therefore, A authorizes B to incur expenses on his behalf so as to secure the services of a transporter, & agrees to reimburse B for the particular cost of transportation. within the given example, B is providing A with Customs Brokerage services on a principal-to-principal basis. The ancillary service of transportation is acquired by B on behalf of A as a pure agent, and B’s transportation expenses shouldn’t be included in the value of the Customs Broker service provided by B to A. In essence, this is often the relevance of the pure agent concept in the GST.

Pure Agent is a private who

Costs incurred as a pure agent become relevant when determining the worth of a supply for GST purposes. The valuation rules stipulate that expenses incurred as a pure agent are excluded from the worth of the supply and, by extension, the entire revenue. However, such exclusion of expenses incurred as a pure agent is merely possible if the supplier in each case satisfies all conditions required to be considered a pure agent as well as any additional conditions specified in the rules.

Supplier Conditions as Pure Agent:

For exclusion from value, the supplier must satisfy the subsequent conditions:


Port fees, Port charges, customs, dock dues, transport charges, etc. paid by Customs Brokers on behalf of the owner of the products. Expenses caused by the C&F agent and reimbursed by the principal, like freight, and godown charges.

A pure agent concept is crucial for businesses because of its direct implications for the taxable service value. It directly affects the quantity of GST charged on a specific supply. It also affects the supplier’s total annual revenue, and thus the calculation of the registration threshold. Whenever the purpose is to act as a pure agent, care must be taken to make sure that the conditions specified for such agents and additional conditions outlined in the valuation rules are met, in order that only the true value of the service provided is subject to GST.

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