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#GSTCase-218-Rule 33-Compilation of Judgements of AAR on Pure Agent in GST

Case-1- Arivu Educational Consultants (P.) Ltd [2019] 110 426 (AAR – KARNATAKA)

The applicant is collecting the exact: amount payable to institute or college or universities as exam fee from the students (service recipient) and remits the same amount to the respective institute or college or universities (third party) without any profit element or additions, on the authorization of the student. This payment is separately indicated in the invoice issued to the respective students. The applicant providing this kind of services to the student in addition to the services as training and coaching institute. Hence the applicant satisfies all the conditions of the pure agent as narrated in the Rule 33 of the CGST Rules, 2017. Therefore amount of fee collected by the applicant from the student as exam fee which is remitted to the respective institute or college or universities is excluded from the value of supply.

Case-2-DRS Marine Services (P.) Ltd., [2018] 100 323 (AAR – MAHARASHTRA)

From the above provisions of Rule 33 and the facts of the proposed transaction explained by the applicant, we find that the applicant will be acting as a pure agent of RMS inasmuch as the entire amount received by them as Crews’ Salary will be disbursed to the Crew and no amounts from the said receipt will be used by the applicant for his own interest. In fact, for performing as a pure agent they will also be receiving compensation separately in the form of fixed fees to be charged as service charges. In view of the above we are of the opinion that the applicant will not be liable to pay GST on Salary amount received from RMS and disbursed to the Crew.

Case-3- E-Square Leisure (P.) Ltd., [2019] 104 121 (AAR – MAHARASHTRA)

The applicant has installed main electric connection and has different sub connections at each location for reading actual consumption of electricity. Applicant has also installed DG sets for generation of electricity in case of power failure. The water required is also provided through RO system. All these goes to show that these supplies are on their own account and is for effective enjoyment of activities related to the Theatre. Further, we find that the provision of supply is made by the applicant to comply with the mandatory requirements of the local body and the Licensing Authority under Cinema Act and Cinema Rules 3 to operate the Theatre. Further, from the terms of the agreement and the transaction, we do not find any authorization, obtained by the applicant from the recipient of the services, to act as pure agent and to make payment to third parties. In view of the above, we accept the contention of the jurisdictional officer that the applicant has failed to establish themselves as a pure agent as defined under the GST Valuation Rules and therefore the expenditure or cost incurred by the applicant and subsequent reimbursement thereof cannot be excluded from the value of supply.

Case-4- Logic Management Training Institutes (P.) Ltd [2020] 119 49 (AAR – KERALA)

As per Section 15 of the CGST Act, 2017 the entire consideration received by the applicant from the recipient of services is liable to GST. However, if in respect of the amount collected as examination fees/other fees the conditions prescribed in Rule 33 of the CGST Rules, 2017 are satisfied then such amount can be excluded from the value of taxable supply as expenditure incurred by the applicant as a pure agent of the recipient of services.

Case-5- Premier Vigilance & Security (P.) Ltd [2018] 99 79 (AAR-WEST BENGAL)

Vehicles were owned by applicant and toll has been charged for providing service by way of access to a road or bridge. Therefore, applicant admittedly was the beneficiary and liable to pay toll, which is compulsorily levied on vehicles. Bank never acknowledged payment of toll charges as their own liability but only acknowledged that toll charges would be reimbursed on actual basis. Expenses so incurred are, therefore, cost of service provided to Banks and reimbursement of such expenses is recovery of a portion of value of supply made to Banks. Toll charges paid are not, therefore, to be excluded from the value of supply under Rule 33. GST, therefore, be payable at applicable rate on entire value of supply, including toll charges paid.

Case-6-Flyer issued by CBEC on “Pure Agent”

“Introduction The GST Act defines an Agent as a person including a factor, broker, commission agent, arhtiaa, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. So, who is a pure agent and why is a pure agent relevant under GST? Broadly speaking, a pure agent is one who while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement (as actual, without adding it to the value of his own supply) for such supplies from the recipient of the main supply. While the relationship between them (provider of service and recipient of service) in respect of the main service is on a principal to principal basis, the relationship between them in respect of other ancillary services is that of a pure agent.

Let’s understand the concept by taking an example. A is an importer and B is a Custom Broker. A approaches B for customs clearance work in respect of an import consignment. The clearance of import consignment and delivery of the consignment to A would also require taking service of a transporter. So A, also authorises B, to incur expenditure on his behalf for procuring the services of a transporter and agrees to reimburse B for the transportation cost at actuals. In the given Illustration, B is providing Customs Brokers service to A, which would be on a principal to principal basis. The ancillary service of transportation is procured by B on behalf of A as a pure agent and expenses incurred by B on transportation should not form port of value of Customs Broker service provided by B to A. This, in sum and substance is the relevance of the pure agent concept in GST.

Case-7- Udayan Cinema (P.) Ltd., [2019] 103 219  (AAR-WEST BENGAL)

The Contract does not specify CDIVF as the Applicant’s pure agent. It merely refers to bills for some of the services procured will bear the name of the feature film and will be paid on an actual cost basis. The crucial test is whether these services are a charge on the Applicant or CDIVF. If CDIVF is liable to pay the suppliers of these services no matter what the Applicant does, it will be treated as a charge on CDIVF. As CDIVF holds the production rights, even though as security, all procurements of goods and services will be a charge on him unless specifically excluded. That the bills for such services bears the name of the feature film and not raised on the Applicant corroborates to the above conclusion. No deduction is, therefore, available in terms of the contract with CDIVF from the value of the supply of motion picture production service even if payment is made on an actual cost basis.

Case-8- Maansmarine Cargo International LLP [2019] 109 372 (AAR – MAHARASHTRA)

The reimbursement received by the applicant pertains to establishment costs which would be incurred by them for running their office in India. In any normal business such expenses are borne by the supplier of service and it is but natural that they would include such costs in the value to be received from the recipient of their services. In the subject case the said costs, are termed as reimbursements and are recovered in addition to management fees from their clients and therefore it is nothing but additional consideration charged for the supply in this case. The provisions of Section 15 of the CGST Act, which deals with the transaction value are very clear and as per the said provisions the valuation of supply will include all costs, including the employee cost provided by one distinct entity to the other distinct entities.

Case-9- K. K. Polymers, [2018] 100 17 (AAR- RAJASTHAN)

Transaction made between DCA and customer for passing on specified bonus given by principal is nothing but an additional discount given for early payment made by the customer to the Principal through DCA. In this case there is only one supply made by the principal to the customer of the goods supplied. The additional discount relates to supply already made by the principal and passing on such bonus to the customers by DCA is in the nature of pure agent. However, any amount retained by the DCA on account of early payment is in the nature of supply made to the principal as business support services on which the DCA has already paid GST.