Malceto Manufacturers Ltd., registered in Mumbai (Maharashtra), is a manufacturer of footwear. It imports a footwear making machine from USA.…

As per explanation to rule 33 of the CGST Rules, 2017, a “pure agent" means a person who- (i) 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; (ii) 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; (iii) does not use for his own interest such goods or services so procured; and (iv) 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. The supplier needs to fulfil all the above conditions in order to qualify as a pure agent. In the given case, Shiva Logistics has entered into a contractual agreement with recipient of supply, Malceto Manufacturers Ltd., to incur, on behalf of such recipient, the expenses mentioned in S. No. (ii) to (vii) incurred in relation to clearance of the imported machine from the customs station and bringing the same to the warehouse of the recipient. Further, Shiva Logistics does not hold any title to said services and does not use them for its own interest. Lastly, Shiva Logistics receives only the actual amount incurred to procure such services in addition to agency charges. Thus, Shiva Logistics qualifies as a pure agent. Further, rule 33 of the CGST Rules, 2017 stipulates that notwithstanding anything contained in the provisions of Chapter IV – Determination of Value of supply, 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 authorisation 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. Since conditions (i) to (III) mentioned above are satisfied in the given case, expenses (ii) to (vii) incurred by Shiva Logistics as a pure agent of Malceto Manufacturers Ltd. shall be excluded from the value of supply. Accordingly, value of supply made by Shiva Logistics is as follows: Particulars Amount (₹) Agency charges 5,00,000 Add: Unloading of machine at Kandla port, Gujarat Nil Charges for transport of machine from Kandla port, Gujarat to its godown in Ahmedabad, Gujarat Nil Charges for transport of machine from Shiva Logistics' Ahmedabad godown to the warehouse of Malceto Export Import House in Mumbai, Maharashtra Nil Customs duty Nil Dock charges Nil Port charges Nil Hotel expenses 45,000 Travelling expenses 50,000 Telephone expenses 2,000 Value of supply 5,97,000 Yes, the answer would be different. If lump sum amount of 13,00,000 is paid then the value of supply shall be - 13,00,000 and tax shall be charged on value of supply since individual cost are not given.