Question6: Media Ltd is a Delhi based Dealer, registered under GST, who Supplies media to Sony TV Mumbai. Sony TV Mumbai, organised a TV show and winner of the programme was gifted a Car from Sony. Sony asked the Delhi based winner to purchase the vehicle from Delhi in the name of the winner. Winner purchased a car for Rs. 8 lakh and Sony TV asked his Media Supplier M/s Media Ltd to pay Rs. 8 lakh to car vendor on behalf of Sony TV and Sony TV will pay Rs 10,000/- to Media Ltd as a compensation for effecting this transaction. M/s Media Ltd paid Rs. 8 lakh to car supplier on behalf of Sony TV Mumbai. Now, how M/s Media Ltd will claim this amount Rs. 8Lakh + Rs. 10,000/- from Sony TV Mumbai through Tax Invoice, Debit Note, Credit Note or Bill of Supply. On which amount GST shall be applicable and what Rate' We await your response please. Thanks & Regards.

Answer: It is a case of supply of service as a pure agent where Media Ltd. Delhi has arranged purchaes of car on the request of Sony TV Mumbai and for the same Sony TV Mumbai is paying reward of Rs. 10,000/- to Media Ltd. Delhi. Relevant legal provision is Rule 33 of CGST Rules, 2017 which reads as under; RULE 33. Value of supply of services in case of pure agent (corresponding section 15) Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient;

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression 'pure agent' means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

(c) does not use for his own interest such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. For completing the transaction first Sony TV Mumbai needs to place an order for the above said transaction on Medial Ltd. Delhi in view of clause (a) to the above Explanation. A debit note would be raised by Media Ltd.by showing Rs. 8 lakh as the expenditure incurred for the supply of service on behalf of Sony TV. and For the remaining amount of Rs. 10,000/- to be paid as reward to Media Ltd by Sony TV, the Media Ltd. issue a invoice and will show this amount as value of service on which IGST @ 18% under business support service head would be charged. In this manner the transaction would be completed. (Reply dt. 15/11/2017)