Direct answer: CGST Rule 29 values qualifying goods supplies between a principal and agent at open market value or, at the supplier’s option, 90% of the price charged by the recipient for goods of like kind and quality to an unrelated customer, where further supply is intended. The 90% is a valuation percentage, not a GST rate or an automatic deduction from every distributor invoice.
Checked on 23 October 2026 using the CGST Rules, including Rules 29–31, in ICAI’s April 2026 compilation and CBIC Circular 57/31/2018-GST dated 4 September 2018. This article concerns the principal-agent goods transaction and a reproducible valuation working. The agent’s separately supplied commission service requires its own analysis.
Establish the representative relationship before valuing goods
Read the agency contract alongside actual invoices and the flow of goods. Circular 57 examines the representative character of the arrangement and who issues or receives the goods invoice in their own name. A commercial description such as distributor, broker or commission agent does not settle the GST treatment by itself.
Schedule I paragraph 3 can cover specified goods movements between principal and agent without consideration. Do not automatically extend that goods entry to every service or use it merely because goods pass through a warehouse. Equally, an actual goods supply needing special valuation should not be omitted simply because no separate cash is collected on dispatch.
Record a valuation method and a defensible comparable
For the Rule 29 option, verify intended further supply, the recipient’s price to an unrelated customer, and goods of like kind and quality. Compare quantities, grade, unit, date and commercial terms. A retail price containing tax, an unrelated product’s price or a forecast rather than a supported customer price can distort the calculation.
Open market value is not automatically interchangeable with a nominal accounting transfer amount. The rule also permits the supplier’s specified 90% alternative when its conditions hold. Document the choice; do not mechanically take whichever number a spreadsheet labels lower without confirming that both are available for the facts.
| Method | Evidence required | Calculation control |
|---|---|---|
| Open market value | Reliable comparable and commercial terms | Use a price excluding applicable GST and cess. |
| Supplier’s 90% option | Qualifying onward supply to unrelated customer | Comparable unit price × 90% × quantity. |
| Fallback | Why Rule 29(a) cannot determine value | Apply Rule 30, then Rule 31, in that order. |
Do not import another rule’s concession
The full-input-tax-credit invoice-value proviso appears in Rule 28’s relevant framework. It should not simply be pasted into Rule 29 as a universal rule for agents. Confirm the governing provision before accepting an arbitrary declared value because the other party expects full credit.
Where Rule 29(a) cannot determine value, Rule 29(b) takes the working to Rule 30 and then Rule 31. Rule 30 uses 110% of the relevant production, manufacture or acquisition cost. A documented inability to obtain a reliable selling-price comparator should lead to the next statutory step, rather than a guessed 90% of purchase cost.
Reconcile valuation, billing and commission separately
Keep quantity and value controls for principal-to-agent goods, agent-to-customer supplies and the agent’s own service consideration. A settlement statement can net cash, discounts and commission; it does not erase the distinct supplies. Review GST rates, place of supply, exemptions, invoice timing and any later credit-note adjustments separately from this value calculation.
The six illustrations calculate goods value only. They assume a qualifying Rule 29 relationship and supported tax-exclusive comparables unless otherwise stated. They do not calculate GST or assert a tax rate for an unspecified product. Amounts and products are fictional.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: A supported supplier option
The recipient agent’s unrelated-customer price for goods of like kind and quality is ₹2,000 per unit. For 100 units intended for further supply, the supplier exercises the Rule 29 option. Value is ₹2,000 × 90% × 100 = ₹1,80,000. The ₹20,000 difference from ₹2,00,000 is a value difference, not a GST credit.
Illustrative example 2: Open market value can differ from the option
Supported open market value is ₹1,840 per unit. The same goods’ qualifying onward customer price is ₹2,000. For 50 units, open-market value is ₹92,000; the valid 90% option gives ₹90,000. The ₹2,000 difference should be explained by the selected method, not treated as a stock quantity error.
Illustrative example 3: Grade-wise comparables
A shipment contains 30 units of Grade A with an unrelated-customer price of ₹3,000 each and 20 Grade B units priced at ₹2,000 each. Under a valid option, respective values are ₹81,000 and ₹36,000, totalling ₹1,17,000. Applying Grade A’s ₹2,700 deemed unit value to all 50 units would give ₹1,35,000 and overstate value by ₹18,000.
Illustrative example 4: Cost fallback is 110%, not 90%
Neither open market value nor a qualifying onward comparable can determine value under Rule 29(a). Supported acquisition cost for the lot is ₹80,000 and Rule 30 applies. Value is ₹88,000. Taking 90% of cost would produce ₹72,000, understating the proper cost-based value by ₹16,000.
Illustrative example 5: Use the supplier’s intended further-supply quantity
A principal supplies 200 qualifying units for the agent’s further supply; the supported unrelated-customer price is ₹1,500 per unit. The valid option values the principal’s supply at ₹2,70,000. Only 120 units have been sold onward by a later reconciliation date; that does not reduce the original 200-unit goods supply to ₹1,62,000. The value difference is ₹1,08,000 and relates to 80 units, not an automatic reduction or credit note.
Illustrative example 6: Reconcile goods value and service commission
For 40 qualifying units, the onward unrelated-customer price is ₹5,000 each, so the supplier’s option gives goods value of ₹1,80,000. A distinct agreed agency-service commission is ₹12,000. Merely netting that commission from the goods value gives ₹1,68,000, a ₹12,000 unsupported valuation reduction on these facts. Keep the two supplies and their documents separate.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm the actual representative principal-agent arrangement. | Contract and responsibility analysis. |
| 2 | Trace who issues or receives goods invoices in their own name. | Sample invoices and Circular 57 conclusion. |
| 3 | Establish the particular goods supply and any Schedule I treatment. | Movement register and supply memorandum. |
| 4 | Identify the supplier exercising any Rule 29 option. | Approved valuation working and option conclusion. |
| 5 | Verify intended further supply and unrelated-customer comparables. | Customer invoice and relationship evidence. |
| 6 | Match grade, unit, quantity, period and commercial terms. | Comparable matrix and stock records. |
| 7 | Use tax-exclusive prices and a consistent unit basis. | Invoice breakup and quantity conversion. |
| 8 | Apply Rule 30 then Rule 31 where necessary. | Unavailable-comparable explanation and cost evidence. |
| 9 | Separate commission and other services from goods value. | Service invoices and settlement reconciliation. |
| 10 | Reconcile statutory value to invoices, returns and adjustments. | Final value bridge and separately reviewed rate/timing conclusion. |
Sixteen practitioner FAQs
1. Does calling someone an agent make Rule 29 applicable?
No. Examine the actual representative relationship, invoices and goods supply.
2. Why does invoice issuance matter?
Circular 57 uses the invoice-in-own-name position as a key indicator in analysing Schedule I principal-agent goods supplies.
3. Can goods supplied without separate consideration be relevant?
Yes. Specified principal-agent goods supplies can fall within Schedule I; analyse the conditions first.
4. Is 90% the GST rate?
No. It determines the value under a qualifying option; tax liability requires a separate rate and supply analysis.
5. Is the option mandatory whenever onward sales exist?
Rule 29 gives the specified option to the supplier. Record the chosen legally available method.
6. Can a related customer’s price support the stated option?
The option requires the recipient’s price to a customer who is not a related person.
7. Can a different grade’s price be copied?
Do not assume it is comparable. Establish goods of like kind and quality and relevant commercial facts.
8. Should GST-inclusive retail collections be used directly?
Not without separating the tax-exclusive comparable value. Preserve the invoice breakup.
9. Can 90% be applied to the principal’s purchase cost?
That is not the Rule 29 customer-price option. Where Rule 30 applies, its relevant cost percentage is 110%.
10. What follows if Rule 29(a) cannot determine value?
Rule 29(b) directs application of Rule 30 and then Rule 31, in that order.
11. Does full ITC automatically validate any invoice value for an agent?
Do not import Rule 28’s proviso as if it were part of Rule 29. Apply the actual governing rule.
12. Does unsold agent stock reduce the quantity originally supplied?
Not automatically. Reconcile the principal’s goods supply separately from later onward sales and any legally supported adjustments.
13. Can commission simply be deducted from goods value?
Not merely because cash settlement is net. Identify the separate supplies and apply their respective valuation treatment.
14. Does this working determine the agent’s commission-service GST?
No. The service requires separate consideration, rate, time and place-of-supply analysis.
15. Is a warehouse movement always a principal-agent supply?
No. Establish the transaction and statutory conditions from the actual relationship and documents.
16. What should a valuation exception report contain?
Unmatched quantities, missing or related-party comparables, mixed grades, incorrect price bases and unexplained settlement deductions.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assureTax or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
Establish the goods supply first, then select and evidence the available valuation route. Keep the goods quantity, comparable price and separate agency-service records traceable.