Pure-agent exclusion denied where manpower supplier remained liable for wages, keeping salary costs in taxable value.
Rule 33 pure-agent exclusion was unavailable where the supplier had entered into employment arrangements with the workmen, maintained wage records, and remained legally liable for their salary and wages. Authorisation by the client and separate invoice disclosure did not alter the underlying liability, because the amounts were paid in the supplier's own capacity rather than on behalf of the recipient. As a result, the salary and wages formed part of the consideration for manpower supply and could not be excluded from the value of supply under Section 15 of the CGST Act.
Issues: (i) Whether the applicant acted as a pure agent under Rule 33 of the CGST Rules, 2017 while paying salary and wages to manpower supplied to the client. (ii) Whether salary and wages paid by the supplier could be excluded from the value of supply under Section 15 of the CGST Act, 2017.
Issue (i): Whether the applicant acted as a pure agent under Rule 33 of the CGST Rules, 2017 while paying salary and wages to manpower supplied to the client.
Analysis: Rule 33 permits exclusion of expenditure from the value of supply only when the supplier acts as a pure agent of the recipient, incurs the payment on authorisation, separately indicates it in the invoice, and satisfies the conditions in the Explanation, including that the amount recovered is only the actual amount incurred to procure such goods or services. The agreement and surrounding documents showed that the applicant entered into employment arrangements with the workmen, maintained wage registers, and remained liable as employer for payment of wages to them. The fact that the client authorised payment and the amount was separately shown in the invoice did not change the underlying liability, because the wages were payable by the applicant in his own capacity and not as an amount incurred on behalf of the client.
Conclusion: The applicant was not acting as a pure agent.
Issue (ii): Whether salary and wages paid by the supplier could be excluded from the value of supply under Section 15 of the CGST Act, 2017.
Analysis: The exclusion under the pure agent rule is available only when the statutory conditions are strictly met. Since the applicant was found to be the person legally obliged to pay the workmen under the employment arrangements, the salary and wages formed part of the consideration structure for the manpower supply and could not be treated as a reimbursable amount incurred on behalf of the client. Mere separate disclosure in the invoice was insufficient to take the payment outside the value of supply.
Conclusion: The salary and wages could not be excluded from the value of supply.
Final Conclusion: The ruling denies pure-agent treatment and confirms that the wage component remains includible in the taxable value of the manpower supply.
Ratio Decidendi: A supplier cannot claim pure-agent exclusion where the amount paid is a liability incurred by the supplier in its own capacity, even if the recipient authorises payment and the amount is separately shown in the invoice.
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