A person including broker, commission, agent, del creder agent, auctioneer or any other person running a business of supply of goods and services on behalf of other person is an Pure Agent.

·         Supplies to Recipient

·         Receives and incur expense on behalf of Recipient

·         Claims Reimbursement

·         Relation between provider and receiver is Principal to Principal
Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.

Key Points to determine Pure Agent

1.    Enters to contractual agreement with the recipient of supply to act on their behalf and incur expenditure or costs in the course of supply of goods or services or both

2.    Neither intends to hold nor holds any title to the goods or services (or both) procured on behalf of or provided to the recipient of supply;

3.    Does not use the goods or services so procured for his own interest; and

4.    Receives only the actual amount incurred to procure such goods or services.

Exclusion from Aggregate Turnover

In the GST law another remedy has been given to supplier of goods and services that expenditure incurred as a pure agent, will be excluded from the aggregate turnover.  As such pure agent concept has direct bearing on the aggregate turnover of the supplier. Therefore, it will not be included in calculating the threshold limit for registration.

Conditions for excluding value of pure agent services 

Expenditure or costs incurred by the supplier as a pure agent of the recipient of service shall be excluded from the value from the value of taxable supply if all the following conditions are satisfied which are as follows:

1.    The service provider acts as a pure agent of the recipient of service when he makes payment to third party on authorization by such recipient.

2.    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

3.    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 

Examples of Pure Agents Services 

1.    Event Management Services: “A” serves to the “B” for INR 25000 of contract amount for Event Management which it raises the Invoice as a Pure Agent for Out of Pocket Expenses to “B” with the supporting like Hotel Bills, conveyance invoices and other services. Against which “B” pays you 100% of the amount without TDS i.e. INR 25000. Here “A” acts as a Pure Agent and the Amount of INR 25000 is not considered as revenue for registration purpose of “A”

2.    Custom House Agent: MNC Pvt. Ltd. is an importer and CHA is a customer broker agency. MNC Pvt. Ltd. approaches CHA agency for the customer clearance work for an import consignment. CHA will also take the services of a transporter along with the clearance of import consignment and delivery of the consignment to MNC Pvt. Ltd . So MNC Pvt. Ltd. authorizes CHA agency to incur expenditure on his behalf for procuring the transportation. MNC Pvt. Ltd. agrees to reimburse the actual transportation cost to CHA agency.

3.    Company Incorporation Service:SUB Pvt. Ltd.” is engaged to handle the legal work pertaining to the incorporation of a company run by X. Other than its service fees, SUB Pvt. Ltd.”  also recovers from X the registration fee and approval fee for the name of the company which was paid to Registrar of Companies. The fees charged by the Registrar for the company’s registration, and approval of the name are compulsorily levied on X. SUB Pvt. Ltd.”  is merely acting as a pure agent in the payment of those fees. Therefore, SUB Pvt. Ltd.”’s recovery of such expenses is a disbursement and not part of the value of supply made by SUB Pvt. Ltd.” to X.