Valuation of Supply Rule Under GST In Case of Pure Agent


    Under the GST system in India, the valuation of supply is an essential aspect that assesses the amount of tax payable by businesses. The concept of a pure agent is an important consideration in the valuation of supply under GST, especially for those engaged in providing services. The provisions for this have been referred to in Rule 33 of the CGST Act. 

    Who is a Pure Agent?

    A pure agent refers to an individual who:

    1. Enters into a contract with the recipient of the supply to act on their behalf and incur expenses or costs in connection with the provision of products or services, or both;
    2. Neither holds any title nor intends to hold any interest in the commodities or services (or both) obtained for or given to the recipient of the supply;
    3. Does not use the products or services obtained for personal benefit; and
    4. Receives only the amount spent on buying the products or services as reimbursement.

    In essence, a pure agent acts as a conduit for the supply of goods or services, and their role is limited to facilitating the transaction between the supplier and the recipient of the supply.

    Who is the Principal?

    The term “Principal” refers to a person on whose behalf an agent conducts the business of supplying or receiving goods or services or both, according to the definition given in the GST law.

    Rule 33 under the CGST Act includes provisions regarding the exclusion of expenditure or costs incurred by a supplier acting as a pure agent or the recipient of the supply from the value of supply, subject to certain conditions being met. 

    1. The pure agent pays the third party on behalf of the recipient when the contract for the services obtained is between the third party and the recipient, as in the case of legal costs paid to the Registrar of Companies (RoC) in the example above.
    2. The sole use of the services obtained by the pure agent from the third party is the recipient of the supply;
    3. The supply’s recipient is responsible for paying the third party;
    4. The pure agent is given the recipient’s permission to pay for the supply;
    5. The recipient of the supply is aware that the third party is providing the services for which the pure agent has made payment;
    6. The payment paid by the pure agent on behalf of the supply receiver is expressly stated in the invoice generated by the agent.
    7. Only the money that the recipient has paid to the third party is what the pure agent recovers from the recipient.
    8. In addition to the goods and services the pure agent supplies on his own, he often hires third-party workers to perform certain tasks.

    To illustrate this concept, consider the example of a corporate services firm handling legal work to incorporate a company. The firm may recover registration and approval fees paid to the Registrar of Companies from the client and its service fees. Since the fees charged by the Registrar of Companies are compulsory and the firm acts as a pure agent in paying those fees, the recovery of such expenses is considered a disbursement and not part of the value of supply made by the firm to the client.


    The valuation supply rule under GST in the case of pure agents is an important aspect to consider for businesses operating in India. The GST law excludes expenditure or costs incurred by a supplier acting as a pure agent of the recipient of supply from the supply value. These rules ensure that businesses are not subjected to tax on expenses not intended for their own benefit but rather incurred on behalf of the clients.

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