Proprietorship Company Denied "Pure Agent" Status in GST Ruling

The applicant, a proprietorship company seeking an advance ruling on the applicable GST rate for supplying labor services, was found not to qualify as a "pure agent" under the CGST Act/Rules. The applicant's service of supplying labor falls under the taxable category of Other employment and labor supply services, attracting an 18% GST rate (CGST-9% + SGST-9%) as per Notification No. 11/2017-Central Tax (Rate).

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Issues Involved:
1. Determination of the applicable GST rate for the activity carried out by the applicant.
2. Whether the applicant qualifies as a "pure agent" under the CGST Act/Rules.

Detailed Analysis:

1. Determination of the Applicable GST Rate:
The applicant, a proprietorship company, sought an advance ruling to determine the applicable GST rate for the activity of supplying labor services. The applicant intends to work as a pure agent for a company that will be the recipient of the labor supply services. The company authorizes the applicant to make payments to third parties (labor) on its behalf, and the applicant issues two types of invoices: one for reimbursement of salary payments made to labor and another for service and consultation fees.

2. Whether the Applicant Qualifies as a "Pure Agent":
The core issue is to determine if the applicant qualifies as a "pure agent" under the CGST Act/Rules. To address this, the Authority for Advance Ruling referred to Section 15 of the CGST Act, 2017, which defines the value of taxable supply, and Rule 33 of the CGST Rules, 2017, which outlines the conditions for a supplier to be considered a pure agent.

As per Rule 33, a pure agent is defined as a person who:
- Acts as a pure agent of the recipient of the supply when making payments to third parties on authorization by such recipient.
- Separately indicates the payment made on behalf of the recipient in the invoice issued.
- Procures services in addition to those supplied on his own account.

The applicant's agreement with the company and the invoices submitted were scrutinized. The agreement titled "AGREEMENT FOR LABOUR CONTRACT" specifies that the contractor (applicant) shall supply labor as per the company's requirements and be paid accordingly. The contractor is responsible for complying with various labor laws and indemnifying the company against any claims.

Findings:
- The applicant does not satisfy the conditions mentioned in Rule 33 of the CGST Rules, 2017, required for acting as a "pure agent."
- The applicant is engaged in the supply of labor service, which is taxable under the GST Act/Rules.
- The service provided by the applicant falls under Service Accounting Code 998519 - Other employment and labor supply services nowhere else classified.

Applicable GST Rate:
The applicable GST rate for the service of supplying labor is determined by referring to Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017. The relevant entry is Sr. No. 23, which specifies a GST rate of 18% (CGST-9% + SGST-9%) for support services, including labor supply services.

Ruling:
Question: What will be the applicable GST rate for the activity carried out by the applicantRs.

Answer: The applicable GST rate for the activity carried out by the applicant, i.e., supply of labor, is 18% (CGST-9% + SGST-9%) in terms of Sr. No. 23 of Notification No. 11/2017-CT (Rate) dated 28.06.2017.

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