In a recent circular, the Central Board of Indirect Taxes and Customs ( CBIC ) has clarified the scope of the principal and agent relationship under the Goods and Services Tax ( GST ) laws in the context of del-credere agent.
In commercial trade parlance, a DCA is a selling agent who is engaged by a principal to assist in supply of goods or services by contacting potential buyers on behalf of the principal.
With regard to the issue that whether DCA can be treated as an agent under the CGST Act, the circular reiterated that in case where the invoice for supply of goods is issued by the supplier to the customer, either himself or through DCA, the DCA does not fall under the ambit of agent and in case where the invoice for supply of goods is issued by the DCA in his own name, the DCA would fall under the ambit of agent.
It was further clarified that in cases where the DCA is not an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based loan being provided by DCA to the buyer is a supply of service by the DCA to the recipient on Principal to Principal basis and is an independent supply.
“Therefore, the interest being charged by the DCA would not form part of the value of supply of goods supplied (to the buyer) by the supplier. It may be noted that vide notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 (S. No. 27), services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) has been exempted,” the circular said.To Read the full text of the Circular CLICK HERE