MCQ Self Challenge #0100 on Principal Agent Relationship under GST

Principal Agent Relationship under GST

 

Dear Professional Seniors & Friends,
Warm Greeting!

Here is the Next post of #MCQ on concept based practical professional knowledge on Principal Agent Relationship under GST in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.

MCQ 100.1: Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send the goods and issue the invoice directly to Mr. A.

A. Mr. B is acting as an agent and need to obtain mandatory registration.
B. Mr. B is not acting as an agent and need not to obtain mandatory registration.
C. Mr. B is acting as an agent but need not to obtain mandatory registration.
D. Mr. B is not acting as an agent but need to obtain mandatory registration.

MCQ 100.2: Mr. A sells agricultural produce by utilizing the services of Mr. B who is a commission agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr. B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A. What will be the case if invoice is issued by Mr. B directly to the buyer?

A. Mr. B is acting as an agent and need to obtain mandatory registration.
B. Mr. B is not acting as an agent and need not to obtain mandatory registration.
C. Mr. B is acting as an agent but need not to obtain mandatory registration.
D. Mr. B is not acting as an agent but need to obtain mandatory registration.

Sincere Regards!

CA Sanjay Kumar Agrawal
Mobile: 9810116321

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Answer MCQ Self Challenge #0100

 

Dear Professional Seniors & Friends,

Warm Greetings!

 

This post of MCQ is on provisions relating to Tax on Presumptive Basis under Income Tax Act.

 

Answer MCQ 100.1: B) Mr. B is not acting as an agent and need not to obtain mandatory registration.

 

Answer MCQ 100.2: C) Mr. B is acting as an agent but need not to obtain mandatory registration.

 

Practical Analysis for MCQ 100.1 & 100.2:

 

  • In terms of Schedule I of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), the supply of goods by an agent on behalf of the principal without consideration has been deemed to be a supply.
  • In this connection, various representations have been received regarding the scope and ambit of the principal-agent relationship under GST.
  • In order to clarify some of the issues, CBIC has issued a Clarification on ‘Scope of Principal-agent relationship’ vis-a-vis ‘Schedule I of the CGST Act’, vide Circular No. 57/31/2018 dt. 4 Sept. 2018.
  • The said circular state that the crucial factor is how to determine whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal. Since in the commercial world, there are various factors that might influence this relationship, it would be more prudent that an objective criteria is used to determine whether a particular principal-agent relationship falls within the ambit of the said entry or not.
  • Thus, the key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry. However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule I of the CGST Act. 
  • Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.
  • Also Section 24 of the CGST Act makes agents mandatory to have registration under GST.
  • In question 1, Mr. B is only acting as the procurement agent, and has in no way involved himself in the supply or receipt of the goods as the invoice is issued directly by principal to buyer. Hence, in accordance with the provisions of this Act, Mr. B is not an agent of Mr. A for supply of goods in terms of Schedule I.
  • In question 2, invoice is issued by Mr. B, hence he shall be termed as agent for the purpose of Schedule I. However In respect of commission agents in Scenario 4, notification No. 12/2017 Central Tax (Rate) dated 24.06.2017 has exempted “services by any APMC or board or services provided by the commission agents for sale or purchase of agricultural produce” from GST. Thus, the “services‟ provided by the commission agent for sale or purchase of agricultural produce is exempted. Such commission agents (even when they qualify as agent under Schedule I) are not liable to be registered according to Section 23(1)(a) of the CGST Act.

Based on the above analysis, Answer to MCQ 100.1 : B) Mr. B is not acting as an agent and need not to obtain mandatory registration and Answer to MCQ 100.2 : C) Mr. B is acting as an agent but need not to obtain mandatory registration.

 

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)

 

Sincere Regards!

 

CA Sanjay Kumar Agrawal

Mobile: 9810116321

 

To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal

 

For All MCQ post please click on:

Webpage: http://www.casanjay.me/

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