Page 15 - Chapter 2.cdr

were supplied by Mr. Viraj to Mr. Somesh routed through Mr. Tushar where invoice · Extension of credit by the DCA to the recipient
was issued by Mr. Tushar in the name of Mr. Viraj(Principal Supplier). The buyer i. As Mr. Tushar is supplying goods on behalf of Mr. Viraj and issuing invoice in the
Mr. Somesh fails to pay ₹ 5 lakhs within the prescribed time. So Mr. Tushar who name of Mr. Viraj (Supplier), he does not fall within the scope of para 3 of CH 2
has undertaken a guarantee, makes payment to Mr. Viraj on behalf of Mr. Somesh Schedule I
and charges ₹ 15000 as interest to Mr. Somesh. The open market value for supply ii. The Value of supply for Mr. Viraj will be 5 lacsplus GST @12%which does not
of such goods was ₹ 5.10 lakhs. include the amount of interest charged by Mr. Tushar to Mr. Somesh as it is a

I. Whether Mr. Tushar a DCA would fall within the ambit of Para 3 of Schedule I? contract on principal to principal basis.
ii. What is the value of supply for Mr. Viraj, assuming GST @ 12%? Particulars `
iii. Whether commission charged by Mr. Tushar (DCA) to Mr. Viraj (Supplier) Price of Goods 5,00,000
would be liable to GST? Add :- GST @ 12% on above 60,000 Charge of Tax & Concept of Supply
iv. Whether interest charged by Mr. Tushar to Mr. Somesh will form part of value
Total 5,60,000
of supply of goods? iii. Commission charged by Mr. Tushar to Mr. Viraj for supplying goods to the ultimate
v. Would your answer differ if Mr. Tushar issues invoice in his own name for buyer on behalf of supplier will be liable to GST as it is contract on principal to
supply of goods on behalf of Mr. Viraj? principal basis.
Answer: Commission = 500000* 12 % = ₹ 60,000
Legal Provision:- On Commission earned by Mr. Tushar of ₹ 60,000 GST will be charged at the
As per section 7 of CGST Act, 2017, supply includes all forms of supply of applicable rate.
goods/services such as sale, transfer, barter, exchange, lease, rental, licence along with iv. There is levy on interest charged by Mr. Tushar to Mr. Somesh but via exemption

activities specified in Schedule I, made or agreed to be made without consideration. notification such interest is exempted from GST and will not be included in the
Para 3 of Schedule Iof sec 7 is as follows - value of supply of goods.(it is treated as finance charges)
Supply of goods:- v. As supply of goods by Mr. Viraj (principal) to Mr. Tushar (agent) where Mr. Tushar
a. by a principal to his agent where the agent undertakes to supply such goods on undertakes to supply such goods on behalf of the Mr. Viraj and issues invoice in
behalf of the principal: or his own name instead of issuing invoice in the name of principal supplier, the

b. by an agent to his principal where the agent undertakes to receive such goods on principal – agent relationship will established between Mr. Viraj and Mr. Tushar
behalf of the principal Also as per recent clarification issued by CBIC via Circular no and thus Mr. Tushar would fall under the ambit of Para 3 of Schedule I
73/47/2018 dt 5/11/2018 that defines the term Del-credere agent & in context to As per rule 29 of CGST Rules, value of supply of goods between the principal and his
scope of principal agent relationship under Schedule I agent shall:
Possible Scenario in the given case: a) be the open market value of the goods being supplied, OR
· Supply of goods by Mr. Viraj (principal) to Mr. Tushar (DCA) b) be 90% of the price charged for the supply of goods of like kind and quality by the
· Further supply of goods by Mr. Tushar (DCA) to Mr. Somesh (recipient) recipient to his customer not being a related person. (Detailed discussion under

· Supply of agency services by the DCA to the supplier or the recipient or both; Rule 29 of Valuation)

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