Page 13 - Ch2_Supply

CCP 02.05.16.00

M/s M Ltd. being a garment manufacturer, appoints Mr. Ram as an agent, who stores garments
manufactured by M Ltd. and sends to dealers whenever M Ltd. asks Mr. Ram to do so. Mr. Ram issues
his own invoice. Is it a supply? Justify. [ICAI RTP Jun 2018]
Answer:-
Legal Provision:-

Ü Section 7(1)(c) read with Para 3 of Schedule I of CGST Act, 2017 states that supply of goods by a principal
to his agent where the agent undertakes to supply such goods on behalf of the principal shall be treated as
supply even if made without consideration.

Ü As per CBIC clarification, if invoice for further supply is being issued by agent in his own name, then this
activity would be treated as supply under para 3 Schedule 1, otherwise not.
Discussion & Conclusion:-
Ü Yes. Transfer of garments from M Ltd. to Mr. Ram is taxable supply under GST & GST will be levied.
Ü This is because, Mr. Ram (Agent) is issuing invoice in his own name for further supply of goods on behalf of

M/s M ltd.
Ü Thus, this transaction is getting covered under para 3 of schedule I as discussed above.

CCP 02.05.17.00
Charm Limited, registered under GST in the State of Jharkhand, manufactures cosmetic products and
appointed Mr. Handsome of Mumbai, who is registered under GST in the State of Maharashtra, as their
Del-credere agent (DCA) to sell their products. Being a DCA, he agrees to raise invoices in his own
name and also guarantees for the realization of payments from customers to Charm Limited.

In order to realize the payments from customers on time, he extends short term transaction based
loans to them and charges interest for the same.
Mr. Handsome provides you the following details of transactions carried out during month of March
20XX:

S.No. Goods/services supplied Amount (₹)
Outward Supply
(i) Goods sold by Mr. Handsome in his DCA capacity (intra - State transaction) 2,80,000
(ii) Interest earned from the above customers for short term credit facility provided for 20,000
timely payment of dues. (intra-State transaction)

(iii) Commission bill raised on Charm Limited (inter-State transaction) in respect of 30,000
DCA services provided
Inward Supply

Inter-State supply of goods received from Charm Limited. Being a DCA, no
(iv) Nil
consideration was paid. Value under section 15 - ₹ 2,00,000
(v) Received training in marketing and distribution from Charm Limited as per DCA Nil
agreement, free of cost.Company charges ₹ 75,000 for such training when it provides
the same to others.

Applicable rate of tax on both inward and outward supplies is 9% each for CGST and SGST and 18% for
IGST. Amounts given above are exclusive of taxes wherever applicable. Subject to the information
given above, necessary conditions are complied with for availment of input tax credit.
You are required to calculate the gross GST liability and eligible input tax credit for the month of

March 20XX of Mr. Handsome.
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