Start with the authority to supply or receive goods
Paragraph 3 of Schedule I to the CGST Act includes the specified principal-agent supplies of goods even without consideration. On the outbound side it covers goods by a principal to an agent who undertakes to supply them on the principal's behalf. On the procurement side it covers goods by the agent to the principal where the agent undertakes to receive them on the principal's behalf. CBIC Circular 57/31/2018-GST uses representative authority over title and the identity shown on the goods invoice to distinguish the cases.
Read the applicable text: CGST Act, section 2(5) and Schedule I paragraph 3 CBIC Circular 57/31/2018-GST CBIC corrigendum to Circular 57 CBIC Circular 73/47/2018-GST.
Trace the selling leg from dispatch to buyer invoice
Where an authorised agent supplies the goods on the principal's behalf and issues the onward goods invoice in its own name, the circular explains why the principal-to-agent leg falls within the entry. Where the principal invoices the customer directly and the intermediary only arranges the sale, the principal-to-agent goods leg is outside paragraph 3 on those facts. Trace the actual supplier and GSTIN, rather than which user printed or transmitted the invoice.
Reverse the questions on procurement
If the third-party supplier invoices the principal directly and the agent merely identifies or coordinates the purchase, the circular treats that as outside the paragraph 3 goods leg. Where the supplier invoices the goods in the name of an authorised agent procuring them on the principal’s behalf, the circular treats the further provision by that agent to the principal as covered by paragraph 3(b). Reconcile vendor invoice, destination, receipt and onward goods documentation; direct delivery location alone is not the determining evidence.
Separate services, financing and registration analysis
Paragraph 3 concerns goods; commissions and other services require their own supply analysis. A del-credere guarantee does not decide the goods route. Circular 73/47/2018-GST distinguishes principal billing from own-name agent billing; it also distinguishes interest on a separate loan from interest included in the value of an agent’s own-name goods supply, on the respective facts it describes. The corrigendum to Circular 57 addresses registration of commission agents and should be read for relevant facts; do not infer a universal rule from a commission label. This guide classifies the transaction and does not compute Rule 29 value or decide the credit entitlement.
Close one population for each invoice route
Map quantities moved, sold, received, returned and still held to the relevant principal and agent documents. If invoice identities conflict with the mandate, investigate the facts and any correction before closing the return. Do not combine two suppliers' turnover or presume both legs disappear because no cash passed between principal and agent.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Own-name sales evidence
An authorised selling agent receives 100 units and issues own-name customer invoices for 65. Thirty-five remain unsold. Trace all 100 to the principal-to-agent movement file; the 65 sell-through count does not by itself set the paragraph 3 population.
Illustrative example 2: Direct billing by the principal
Of 80 units, the principal directly invoices customers for 50 and holds 30 with an intermediary who only arranges orders. The sales-invoice population is 50 and unsold stock 30; no separate paragraph 3 goods leg follows solely from intermediary custody on the stated facts.
Illustrative example 3: Split procurement routes
A broker arranges 120 units: 90 are vendor-invoiced directly to the principal and 30 to an authorised receiving agent acting in that capacity. The potential agent-to-principal goods population is 30 units; test each invoiced route separately.
Illustrative example 4: Invoice correction queue
A review finds 18 own-name agent invoices, of which three are duplicate extracts and two relate to a different principal. Thirteen distinct records remain for this principal's working.
Illustrative example 5: Separate commission settlement
Assume ₹6 lakh collected on behalf of the principal and an independently agreed ₹30,000 commission retained before remitting ₹5.7 lakh. The cash bridge is ₹6 lakh; classification follows the invoice and authority, not the net payment.
Illustrative example 6: Returns and outstanding stock
Opening 25 plus 75 received, less 56 verified onward units and 10 returned to the principal, gives 34 units to confirm. The return documentation and its GST consequences require a separate review.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the principal and agent | Mandate, GSTINs and goods description |
| 2 | Establish representative authority | Contract rights and actual practices |
| 3 | Select sale or procurement branch | Transaction flow and responsible party |
| 4 | Trace the goods supplier on invoices | Invoice image and reported GSTIN |
| 5 | Check actual movement and receipt | Dispatch and delivery evidence |
| 6 | Reconcile own-name and direct invoices | Separate document populations |
| 7 | Check non-goods payments | Commission, finance and settlement records |
| 8 | Escalate inconsistent routes | Exceptions and supporting chronology |
| 9 | Verify other statutory obligations | Valuation, registration and credit workpapers |
| 10 | Close quantities and cash | Stock roll-forward and reconciled settlement |
Sixteen practitioner FAQs
1. Does calling a party a commission agent settle the outcome?
No. Review its representative role and the goods invoice.
2. Can a supply arise without consideration?
The covered Schedule I goods legs can.
3. Does collecting customer cash alone make the agent the goods supplier?
Trace actual authority and who invoices the goods.
4. What if the agent prints the principal's invoice?
Identify the legal supplier and GSTIN, not the printer.
5. What if an agent invoices in its own name on behalf of the principal?
Assess the paragraph 3 goods leg under the circular.
6. What if the principal bills the customer directly?
A mere arranging intermediary does not create the stated goods leg.
7. Which way does the procurement leg run?
From agent to principal when the covered conditions are met.
8. Does direct physical delivery settle invoice identity?
No. Check the contract, actual receipt role and invoice.
9. Is every dealer an agent?
No. An independent purchase and resale is a different relationship.
10. Is commission a goods supply under paragraph 3?
That paragraph addresses goods; analyse services separately.
11. Does a del-credere guarantee decide the invoice route?
No. Review the guidance in Circular 73.
12. Does this working set GST value?
Determine valuation separately after classification.
13. Can an exempt transaction be inferred from no payment?
No. Test the applicable supply and exemption rules.
14. Should a returned unit be removed from the stock register?
Record the movement and review its document and tax treatment separately.
15. Is a net remittance proof of taxable turnover?
It is a settlement figure and may include offsets.
16. What should be checked before return close?
Mandate, actual goods invoices, movement, returns and settlement by principal.
Official sources
CGST Act, section 2(5) and Schedule I paragraph 3 CBIC Circular 57/31/2018-GST CBIC corrigendum to Circular 57 CBIC Circular 73/47/2018-GST