Example 31

(a)  Company A transfers goods to his clearing and forwarding Agent, who sells goods of like kind and quality to customer at Rs 135000. Such agent also receiving same kind and quality of goods from another independent company B for further sale in Market for Rs 122000. Whether the transfer by Principal to Agent is in purview of supply under GST and if yes what will be the value of supply for charging tax under GST.

Ans.

As per schedule I paragraph (3) supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal even without consideration or by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal, treated as supply under GST.

Rule 29 (Value of supply of goods made or received through an agent) of Chapter -IV of CGST Rules specifies manner to determine value of supply of goods between principal and agent. Value of supply in this case at the option of supplier is the open market value or be  ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient.

Thus in the above example value of supply of goods transferred by company A to its agent is the  open market value which is 122000, i.e. open market value of the same kind and quality goods when another independent supplier transfers to same agent or value at the option of supplier company A can be 90% of  Rs. 135000 i.e. Rs. 121500.

(b)  Continuing with the above example when agent used such goods for any purpose other than intended to sell further. How the value will be determined?

Ans.

According to Rule 29 if goods not intended for further sale by agent, then valuation of supply shall be done according to rule 30, Value of supply of goods or services or both based on cost   i.e. 110% of cost of production or cost of acquisition of such goods. If not determined on Cost basis then value determined according to rule 31, on reasonable means with the principle and general provisions of section 15.