GST Implementation

Pure Agent is an older concept that was announced in the Service Tax. Later on, after the implementation of GST, it is deliberated again and came into effect. A pure Agent can be described as an intermediary person who is working between the supplier and the clients. However to get detailed information regarding Pure Agents you must follow this article.

Introduction of Pure Agent as per GST Rules

As per the Goods and Service Tax (Rule 33 of the CGST Rules) 2017, Pure Agents can be defined after considering some criteria. A Pure Agent is a registered person under the taxable system that is hired or engaged by a client to act as an intermediate to take over all services from other supplies and bear all the expenditures and costs on behalf of the clients who hired the Pure Agents. A Pure Agent is bound with the clients by his financial interest.

A pure Agent is a person who takes services from other service providers for his clients and makes the payments from his pocket. This Payment is further reimbursed by the clients only for the expenditure incurred by availing services from other service providers. Any taxpayer, who fulfills all the four conditions mentioned below, will be termed as a Pure Agent under GST:

  • The taxpayer needs to sign a contractual agreement with the person to whom he is providing goods and services or both. The agreement contains the details regarding the costs bear by him or the expenditures paid by him while providing the Goods or services or both.
  • The taxpayer does not have any plans to hold the goods and services supplied to the party. They neither have any intention to hold the title of the goods or services.
  • The taxpayer does not have any intentions to use the goods and services (for his personal use), that are purchased for the clients.
  • The taxpayers will earn only the actual amount of the goods and services offered to their clients. They won’t charge any extra money by adding it to the margins.

Difference between an Agent and a Pure Agent

The Pure Agents claim the exact amount which is spent by them to avail of the services for their clients. Pure Agents do not add any profit margin for the services offered to their clients. However, an agent works on a commission basis for the clients. An agent charges an extra amount in name of commission for providing the services to his clients. This is the main difference between the Pure Agent and an Agent.

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Calculation of the Value paid by the Pure Agents

We have mentioned earlier that any person working as a Pure Agent will have to bear all the expenses incurred during the supply of the Goods and services. The Pure Agents will be the ones who will experience all the expenditures. Later on, these expenditures incurred by the Pure Agents will be compensated afterward.

Moreover, it should be known that the amount of supply is taxable or not. It simply means that one must be aware of the amount incurred by the Pure Agents is excluded from the taxable amount or not. It is very important to determine the taxable amount of supply on which the taxpayer needs to pay the GST.

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Value of Services Excluded from taxation 

As per the CGST Rules 2017, the costs acquired by the person who is working as a Pure will not be charged under GST, if it satisfies all the conditions mentioned below:

  • When any service provider is working as a Pure Agent for his clients and carrying on the payments as per the orders and authorizations of the clients, then this service provided by the Pure Agents will not be liable to pay the taxes as all the payments were done by the client’s permission.
  • The Pure Agent has to mention the amount of supply specified in the Invoice that this expenditure is incurred as a Pure Agent and needs to be excluded from taxation. The Pure Agents will ensure the client that he won’t be liable to pay the taxes on such services as these expenditures are paid as the Pure Agents.

When the Pure Agent performs some additional service on behalf of his client, this service will be excluded from the taxation. Any other services that are performed by the Pure Agents on behalf of his clients with appropriate authorizations will be excluded. These additional services are performed by the Pure Agents to discharge the liability of the client by his permissions. Hence, the Pure Agents need not worry about the deductions as it is exempted as per the GST Rules.

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