Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 73/2018 dated 5th November, 2018 to clarify the scope of Principal-Agent relationship under Schedule I of the CGST Act,2017 in context of Del-Credere Agent ( herein after referred as DCA).
Following clarifications have been issued with respect to valuation of supplies from Principal to recipient where the payment for such supply is being discharged by the recipient through the loan provided by DCA or by the DCA himself –
| Sl No. | Issue | Clarification |
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Whether a DCA falls under the ambit of agent under Para 3 of Schedule I of the CGST Act? | It has been clarified that DCA will fall under the ambit of agent under Para 3 of Schedule I of the CGST Act depends on the following possible scenarios:
· In case where the invoice for supply of goods is issued by the supplier to the customer, either himself or through DCA, the DCA does not fall under the ambit of agent. · In case where the invoice for supply of goods is issued by the DCA in his own name, the DCA would fall under the ambit of agent.
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Whether the temporary short-term transaction based loan extended by the DCA to the recipient (buyer), for which interest is charged by the DCA, is to be included in the value of goods being supplied by the supplier (principal) where DCA is not an agent under Para 3 of Schedule I of the CGST Act?
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It is clarified that in cases where the DCA is not an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based loan being provided by DCA to the buyer is a supply of service by the DCA to the recipient on Principal to Principal basis and is an independent supply. Therefore, the interest being charged by the DCA would not form part of the value of supply of goods supplied to the buyer by the supplier. |
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Where DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the value of goods being supplied, whether the interest will form a part of the value of supply of goods also or not? | It is clarified that in cases where the DCA is an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based credit being provided by DCA to the buyer no longer retains its character of an independent supply and is subsumed in the supply of the goods by the DCA to the recipient. It is emphasized that the activity of extension of credit by the DCA to the recipient would not be considered as a separate supply as it is in the context of the supply of goods made by the DCA to the recipient. It is further clarified that the value of the interest charged for such credit would be required to be included in the value of supply of goods by DCA to the recipient.
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For further details please refer the attached Circular.
Source: Central Board of Indirect Taxes & Customs
