GST update on DETERMINATION OF PLACE OF SUPPLY IN CASE OF SALE THROUGH AGENTS

Commission Agents as well as Clearing and Forwarding (C&F) Agent are employed by a number of firms in order to promote their sales. There are two types of agents:-
• Where the agent is simply the commission agent who is merely responsible to procure the goods and the Principal directly sends the goods to the buyer.
• Where the agent is clearing and forwarding agent who holds the goods of supplier. On receipt of any order, he dispatches the goods to the buyer.

Under GST regime, the determination of place of supply of goods in case agents are involved is ambiguous. An analysis of provisions contained in IGST Act, 2017 is given as follows:-
The place of supply (other than import or export) in respect of goods will be determined in accordance with section 10(1) of the IGST Act, 2017. This sub-section (1) to section 10 reads as follows:-
"10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––
(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;
(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;"
The clause (b) is applicable where besides supplier and recipient, one more person is involved in the transaction. Thus, in case agents are involved, this clause will apply. A doubt has been raised whether the above clause (b) will apply only to all types of agents namely commission agent and clearing and forwarding (C&F) agent or only to C&F agent.

For the purpose better understanding, the above clause (b) is analyzed as follows:-
This clause is applicable where:-
- three parties are involved - supplier, recipient and third person (may be acting as an agent or otherwise).
- If the goods are delivered by supplier to recipient on direction of third person.
In such a case, it shall be deemed that the third person has received the goods.
- The place of supply shall be Principal place of business of such person.
By analyzing the above clause as above, we can say that this clause does not specify the nature of transaction carried out by the agent. Also, it simply uses the term "third person". It is even not specified that the third person should be an agent. It is simply mentioned with the words "supplier" and "recipient". Both of the terms are defined in section 2(93) and 2(105) of CGST Act, 2017 as follows:-
"93) “recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;"

"(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;"
An analysis of both the definitions makes it clear that buyer will be deemed as recipient of goods in all the cases where he is liable to pay the consideration. However, supplier of goods will be the person who is actually supplying the goods or services. The term supplier shall include the "Agent" as per this definition. Therefore, in our view, the person actually supplying the goods will be deemed as 'supplier'.
Thus, going by the above definition, there will different treatments in case of different types of agents namely C&F Agent and commission agent. In case of C&F Agent, goods are lying at the premise of C&F Agent and as and when any order is received, goods are dispatched by him. In such a case, in our view, C&F Agent will be in the shoes of "supplier". Thus, reading the definition of 'supplier' with the clause (b) above, the principal will be acting as a third person.
However, in case of commission agent, he neither receives the goods nor supplies the same. He is simply responsible for procuring the orders and goods are supplied by the principal himself. Therefore, in such a case, commission agent will be in the shoes of third person.
Based upon above discussion, we are of the view that place of supply will be different in the cases where the commission agent is involved and where the C&F Agent is involved. We are explaining the same with the help of different situations as follows:-

IN CASE OF COMMISSION AGENT:-
Situation 1:-
Principal - In Rajasthan
Commission Agent - In Rajasthan
Buyer - Gujarat.
The agent has procured order and on receipt of such order, the Principal has delivered the goods to Gujarat. Now, in this case, the agent shall be treated as third person on whose direction the goods are being delivered to Buyer in Gujarat. Going by this clause (b), it shall be deemed that the third person, i.e. the agent has received the said goods. In such a case, the premise of Commission Agent (i.e. Rajasthan) shall be treated as place of supply. Since location of supplier (Principal's premise, i.e. Rajasthan) and place of supply are the same, this transaction will be treated as intra-state and CGST and SGST will be charged.

Situation 2:-
Principal - In Rajasthan
Commission Agent - Madhya Pradesh
Buyer - Maharashtra.
Agent has procured order and goods are dispatched by principal to Maharashtra. Thus, supplier is the principal (located in Rajasthan) and going by clause (b), the place of supply will be deemed as premise of agent (i.e. Madhya Pradesh). Since location of supplier is in Rajasthan and place of supply is in Madhya Pradesh; the transaction will treated as inter-state and IGST will be charged.
Situation 3:-
Principal - In Rajasthan
Commission Agent - In Madhya Pradesh
Buyer - In Madhya Pradesh.
In this case, commission agent has procured the order and Principal has supplied the goods. Thus, the location of supplier will be Rajasthan. In this case, goods shall be deemed to be received by the third person, i.e. agent, at Madhya Pradesh and place of supply will be at that place. Since location of supplier is in Rajasthan and place of supply is in Madhya Pradesh, the transaction will be inter-state and IGST will be charged.
IN CASE OF C&F AGENT:-
Situation 1:-
Principal - In Rajasthan
C&F Agent - In Rajasthan
Buyer - In Gujarat.
Principal has procured the order and C&F Agent has supplied the goods. In this case, the C&F will be treated as 'supplier' (located in Rajasthan) and the principal will be treated as third person under clause (b) above. In such a case, the place of supply will be treated as premise of third person, i.e. Rajasthan only. Therefore, since both location of supplier and place of supply are in same states, the transaction will be treated as intra-state and CGST and SGST will be charged.

Situation 2:-
Principal - In Rajasthan
C&F Agent - In Madhya Pradesh
Buyer - In Maharashtra.
C&F Agent has dispatched the goods to Maharashtra on direction of principal. Thus, C&F Agent will be treated as supplier (located in Madhya Pradesh). Principal will be third person under clause (b) above. Thus, in this case, place of supply will be treated as premise of principal, i.e. Rajasthan. In such a case, since location of supplier is in Madhya Pradesh and place of supply is Rajasthan, transaction will be treated as inter-state and IGST will be charged.
Situation 3:-
Principal - In Rajasthan
C&F Agent - In Madhya Pradesh
Buyer - In Madhya Pradesh.
In this case, C&F dispatching the goods will be treated as supplier, thus location of supplier will be Madhya Pradesh. The principal will be treated as third person and his premise will be treated as place of supply, which is in Rajasthan. Since place of supply and location of supplier are in two different states, transaction will be inter-state and IGST will be charged.

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GST update on DETERMINATION OF PLACE OF SUPPLY IN CASE OF SALE THROUGH AGENTS

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