Advance payment for pure agent

[Nagarajan PV]

Dear Experts,

Good Evening.

We are Customs Broker and we perform the role of 'PURE AGENT' for speedy Customs Clearance of Import and Export Activity.

During this process, we normally receive advances from our Customer for the following :

1. Customs Duty

2. Airline / Shipping Line / Freight forwarders

3. Container Freight Stations / Warehouse

All these expenses are paid on behalf of our Customer and billed to Customers as pure agent without any mark-up on these bills.

Due to introduction of GST, few of our Customers raised the issue of 'Advance Payment requires to charged to GST'??

Kindly clarify.

Regards,

Nagarajan

[KASTURI SETHI]

These remarks mean advance payment is meant for payment of GST. As Point of Taxation Rules (which have been carried forward in GST) date of receipt of advance is point of taxation. In other words, payment of GST becomes due on the date of advance.

[CSSANJAY MALHOTRA]

No Tax on "Pure Agent" Services. Please go through Valuation Rules.

[Kishan Barai]

No Tax on Pure Agent coined correctly by CS Sir on Above reply

But when CHA firm bill to Exporter / Importer / Customer they need to charge 18% for there services

[KASTURI SETHI]

Sh.CS Sanjay Malhotra Ji,

Sir, Thanks for clearing the doubt and hence enrichment of my knowledge. Pl. continue sharing knowledge.

AI Summary

GST on advances: tax arises at receipt for broker services, while true pure agent reimbursements remain outside tax. Customs brokers' pass through reimbursements for third party costs, billed as pure agent recoveries without markup, are not taxable supplies, while the point of taxation rule makes tax on the broker's own services payable at receipt of advances; valuation rules should be applied to confirm treatment of reimbursements.