The agent needs more than a commission ledger
CGST Rule 56(11) requires an agent referred to in section 2(5) to maintain accounts showing the authorisation from each principal separately, goods or services received and supplied for each principal, accounts furnished to them, and tax paid on the relevant receipts or supplies. A single net amount payable to “principals” cannot show whether those requirements are met.
Establish representative capacity first
Read section 2(5) and Rule 56(11) in ICAI’s GST bare-law compilation alongside the official CBIC Rules text. This article concerns the agent’s record architecture in FY 2026–27. It does not assume that every distributor, warehouse, consultant or person using the word agent is an agent for every statutory purpose. Establish the authority and actual representative activity before selecting the relevant records.
The record duty does not itself decide principal-agent supply valuation, invoice ownership, taxability, registration or joint liability. Those questions require their applicable provisions. Here the professional issue is whether the records can reproduce the activity and settlements for each principal without cross-allocation or double counting.
Build five connected schedules for every principal
First retain the authorisation: entity identity, period, permitted activities and contractual limits. Second record receipts with description, value and quantity where applicable. Third record supplies on the same basis. Fourth retain each statement of account furnished to the principal and evidence of transmission. Fifth reconcile tax paid on the receipts or supplies, with payment and appropriation evidence. Link these schedules by principal, transaction and document reference.
Do not combine the agent’s own inventory with entrusted goods. Where physical units are relevant, keep a principal-wise movement bridge and location record. A transfer back to the principal is not a sale simply because it reduces the agent’s stock. Conversely, a sale should not disappear because the principal’s proceeds were remitted net of commission.
Gross activity and net cash answer different questions
Show the commercial settlement bridge: collections, authorised deductions, remittances and outstanding balance. Preserve gross underlying goods or service values in the statutory activity schedules. Whether a particular amount is the agent’s accounting revenue or GST taxable value is a separate conclusion; a net bank remittance is not automatically either measure.
Tax-payment evidence must be linked to the relevant principal and transactions. A deposit into a ledger or a private settlement transfer is not automatically proof that a specified statutory liability was discharged. The tax illustration below uses stipulated correctly determined and appropriated amounts; it does not invent a product rate or imply that the agent always pays all goods tax in its own return.
Investigate authority and reporting differences
Reconcile statements sent to principals against the underlying receipt, supply and payment schedules. An internal balanced ledger can still differ from what the principal was told. Track corrections and delivery of amended statements. Where actual activity exceeds the contractual authority, record it as an exception and resolve the mandate and legal consequences; a corrected spreadsheet does not retrospectively create authority.
Rule 56’s wider document and correction controls also matter. Preserve source documents and an audit trail for edited entries. Avoid replacing a principal’s historical opening balance to conceal an unexplained difference. The examples are independent, fictional record reconciliations, not decisions on an unstated GST liability.
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Two principals, separate closing units
Principal A has 100 units received and 65 supplied, leaving 35. Principal B has 70 received and 50 supplied, leaving 20. The combined 55 units must remain attributable as 35 plus 20; one pooled total cannot demonstrate each principal’s position.
Illustrative example 2: Own goods are a third category
The agent holds 35 A-units, 20 B-units and 10 own units. Physical custody totals 65, but principal-owned units total 55 and own units 10. Reporting all 65 as entrusted goods would overstate that population by 10.
Illustrative example 3: Net remittance does not erase gross activity
Assume gross collections for a principal are ₹4,00,000, authorised commission deduction ₹20,000 and agreed expense deduction ₹5,000, all on a stipulated tax-neutral settlement basis for this model. Net remittance is ₹3,75,000. The ₹25,000 deductions need separate support; the gross activity record is not reduced to ₹3,75,000 merely by the remittance.
Illustrative example 4: Tax-payment reconciliation
Correctly determined relevant tax is stipulated at ₹54,000, of which ₹32,400 has been validly paid and appropriated. The outstanding amount in the working is ₹21,600. A separate commercial remittance of ₹10,000 to the principal does not change that statutory-payment figure without relevant discharge evidence.
Illustrative example 5: Statement differs from the ledger
Underlying records show 120 units received, 90 supplied and 30 remaining. The statement furnished to the principal reports 25 remaining. Investigate the five-unit difference and issue a supported correction; do not silently amend the underlying ledger to 25.
Illustrative example 6: Contractual quantity limit
The authorisation expressly permits receipt of 500 units during the relevant period; actual receipts are 520. The excess is 20 units, or 4% of the contractual limit. This is an authority exception in the fictional agreement, not a statutory 500-unit or 4% rule.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Determine agent capacity | Contract and actual representative conduct. |
| 2 | Identify each principal | Legal identity, GST details where relevant and master reference. |
| 3 | Retain separate authorisation | Period, activity and contractual limits. |
| 4 | Record receipts | Description, value, quantity where applicable and document references. |
| 5 | Record supplies | Principal-wise activity and dispatch/service evidence. |
| 6 | Reconcile custody | Principal-owned, own and other entrusted goods separately. |
| 7 | Retain accounts furnished | Statements, transmission evidence and amendments. |
| 8 | Reconcile settlement deductions | Commission, expenses, remittances and unpaid balances. |
| 9 | Match tax-payment evidence | Correct liability and actual payment/appropriation trail. |
| 10 | Resolve and preserve exceptions | Authority breaches, statement differences and correction logs. |
Sixteen practitioner FAQs
1. Does a commission ledger alone satisfy Rule 56(11)?
No. It omits the separately required authority, principal activity, accounts furnished and tax-payment information.
2. Must authorisations be identifiable by principal?
Yes. The rule expressly requires particulars of authority received from each principal separately.
3. Does every distributor fall within this article?
No. Determine representative capacity under the applicable facts and statutory definition.
4. Are only goods covered by the record wording?
The rule addresses goods or services, with quantity where applicable.
5. Must the value and description be retained?
Yes. Those particulars are part of the rule’s receipt and supply records.
6. Can all entrusted stock use one unallocated total?
A combined total should reconcile to principal-wise records; it cannot replace them.
7. Should the agent’s own goods be separated?
Yes. Otherwise physical custody can be misreported as principal-owned activity.
8. Does a return to principal automatically mean a sale?
No. Record the real movement and assess its legal treatment separately.
9. Can net cash remitted be substituted for gross supplies?
No. Preserve the underlying activity and separately reconcile commercial deductions.
10. Does this article decide the agent’s taxable value?
No. Valuation and supply classification require their own applicable provisions.
11. What are accounts furnished to principals?
The statements or accounts actually supplied to them, which should be retained and linked to their underlying records.
12. Does a balanced internal ledger prove the principal received the same statement?
No. Reconcile the furnished statement and transmission record as well.
13. Can a remittance to the principal be marked as GST paid automatically?
No. Verify the statutory liability and payment/appropriation evidence.
14. Does the tax example prescribe a rate?
No. It begins with a stipulated correctly determined tax amount.
15. Can an excess over contractual authority be cured by a ledger edit?
No. Preserve and resolve the actual mandate exception and consequences.
16. What should a final principal-wise file reproduce?
Authority, gross receipts and supplies, custody balances, statements furnished, settlement deductions and the relevant tax-payment trail.
Conclusion
An agent’s GST records must identify each principal’s authority, receipts, supplies, statements and tax paid. Principal-wise schedules prevent net settlements and pooled stock from hiding missing transactions or cross-principal errors.