TaxTMI 
TaxTMI 
2026 (8) TMI 973
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....ance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression "GST Act" would mean the CGST Act and the WBGST Act both. 1.2 The applicant, Feel Good Hospitality Private Limited, is a private limited company registered under the Goods and Services Tax law and is presently engaged in the restaurant business. The applicant proposes to expand its business operations by undertaking travel and accommodation booking agency services, wherein it would act as a facilitator for arranging hotel accommodation for end customers through third-party agents. Under the proposed business model, the applicant intends to recover the actual cost of hotel accommod....
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.... the original application, particularly with respect to satisfaction of the conditions stipulated under Rule 33 of the Central Goods and Services Tax Rules, 2017 for qualification as a "Pure Agent". In both the original and additional submissions the Applicant contends that it satisfies the mandatory conditions under the Explanation to Rule 33 and is therefore entitled to exclude the hotel accommodation cost recovered from its customers from the taxable value of supply and to discharge GST only on the Facilitation Fee / Service Charge charged by it. 2.2 The Applicant submits that under its proposed business model, the End Customer approaches the Applicant seeking hotel accommodation. The Applicant, acting as the authorized booking agent of the End Customer, sources such accommodation from a Third-Party Agent, for example ABC Tours & Travels, having networks and agreements with hotels. The Third-Party Agent issues a tax invoice in the name of the Applicant while identifying the End Customer as the consumer. Thereafter, the Applicant recovers from the End Customer the exact hotel accommodation cost at actuals as a "Pure Agent" reimbursement along with a separate Facilitation Fee /....
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....ith each End Customer prior to the booking of hotel accommodation. The Agreement expressly records that: (i) the End Customer appoints the Applicant as its authorized Pure Agent; (ii) the Applicant is authorized by the End Customer to incur hotel accommodation expenses on the Customer's behalf; (iii) the entire liability to pay the Third-Party Agent/Hotel lies with the End Customer, and the Applicant merely settles the amount temporarily as a conduit; and (iv) the Customer has a free choice of hotel and accommodation standard, and the Applicant acts strictly upon the Customer's specification without exercising any independent discretion. The draft of this Agreement forms part of the original application and is available for the Authority's perusal. ✓SATISFIED Condition B: Condition (b): The supplier neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. [Explanation to Rule 33(b)] The Applicant holds absolutely no title, legal, beneficial, or otherwise, to the hotel room or accommodation service so procured. The hotel room is exc....
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....under Rule 33(i), the Applicant makes payment to the Third-Party Agent strictly upon written authorization of the End Customer as incorporated in the Agency and Facilitation Agreement. Such Agreement expressly records the End Customer's instruction to the Applicant to procure hotel accommodation on his behalf and to make payment thereof. 2.6 With regard to the requirement of separate indication in the invoice under Rule 33(ii), the Applicant submits that the Tax Invoice issued by it to the End Customer distinctly separates the following two components: a. Line Item 1: Facilitation Fee / Service Charge, subject to GST @ 18% under SAC 9985; and b. Line Item 2: Reimbursement of Hotel Accommodation Cost (paid to Third-Party Agent as Pure Agent), not subject to GST, with a clear note that this represents actual costs incurred under Rule 33 / Section 2(5) of the CGST Act, 2017. The Applicant submits that the aforesaid bifurcated invoice format is consistent with the requirement of Rule 33(ii) and also aligns with the format approved by the Delhi Authority for Advance Ruling in M/s TUI India Private Limited, Order No. 09/DAAR/2018 dated 28.06.2019. 2.7 As re....
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....GST Act, 2017 defines an "Agent" as a person who carries on the business of supply or receipt of goods or services or both on behalf of another taxable person. According to the Applicant, it acts strictly on behalf of the End Customer and the primary intention of its proposed business is to facilitate the booking of hotel accommodation. The Applicant therefore claims to satisfy the definition of an Agent under Section 2(5) of the CGST Act, 2017. 2.10 The Applicant also refers to Section 2(105) of the CGST Act, 2017 which defines "Supplier" in relation to any goods or services or both as the person supplying the said goods or services or both and includes an agent acting as such on behalf of such supplier. The Applicant contends that when accommodation is procured from a Third-Party Agent, such Third-Party Agent is the "Supplier" within the meaning of Section 2(105), whereas the Applicant merely acts as a bridge between the Supplier, being the Third-Party Agent, and the Recipient, being the End Customer. 2.11 The Applicant further refers to Section 2(107) of the CGST Act, 2017 defining a "Taxable Person" as a person who is registered or liable to be registered under Section 22....
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....ll such conditions. 2.16 In light of the foregoing submissions, the Applicant prays that it be held and declared to qualify as a "Pure Agent" under Rule 33 of the CGST Rules, 2017 read with the Explanation thereto, on the ground that all four cumulative conditions under clauses (a), (b), (c) and (d) are fully satisfied. The Applicant further prays that the hotel accommodation cost recovered by it from End Customers as a pure agent reimbursement be excluded from the value of taxable supply under Rule 33 of the CGST Rules, 2017. The Applicant accordingly contends that GST @ 18% comprising CGST @ 9% and SGST @ 9% should be chargeable only on the Facilitation Fee / Service Charge under SAC 9985 and not on the hotel accommodation reimbursement component. 3. Submission of the Revenue 3.1 The concerned officer from the Revenue has submitted that the applicant proposes to undertake the business of arranging hotel accommodation for its customers through a third-party travel agent, namely ABC Tours & Travels. Under the proposed arrangement, the third-party agent would issue the tax invoice in the name of the applicant, though the name of the end customer would also be mentioned ther....
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.... are required to be fulfilled simultaneously. 3.5 The Revenue has also submitted that the definition of "agent" under section 2(5) of the GST Act cannot, by itself, confer the status of a "pure agent" for the purposes of rule 33. It has been contended that there are two distinct supplies involved in the proposed arrangement, namely, supply by ABC Tours & Travels to the applicant and supply by the applicant to the end customer. Therefore, the amount recovered towards hotel accommodation charges forms part of the consideration for the supply made by the applicant and cannot be excluded from the value of supply merely on the ground that the same is recovered at actual cost. 3.6 The Revenue has accordingly opined that the applicant does not qualify as a pure agent under rule 33 and that the entire amount recovered from the end customer, including the hotel accommodation charges and the facilitation/service fee, would form part of the value of supply under section 15 of the GST Act. The Revenue has therefore prayed that the applicant's claim for exclusion of the hotel accommodation charges from the taxable value under rule 33 be rejected. 4. Observations & Findings of the A....
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....actual agreement with ABC Tours & Travels for booking of rooms & making payment to them on behalf of clients. e. It receives only the actual amount incurred to procure the hotel services, in addition to the amount received for the services it provides on its own account. 4.4 The applicant believes that in course of his proposed business activity he qualifies as 'pure agent' on all the four counts as prescribed in Explanation to Rule 33 of the CGST Rules, 2017. He enters into a contract with the end customer to incur expenditure in the course of supply of services. The applicant no title whatsoever to the hotel room or services procured. According to him, he has no conceivable business interest in occupying or utilizing hotel rooms procured for his customers. Last of all, the applicant recovers from the end customer the exact amount charged by the third party without any mark up or profit margin. So according to the applicant's viewpoint, all the four conditions are applicable for the proposed business activity. 4.5 The Revenue has given his submission in details. The Revenue has discussed the pattern of activity proposed by the applicant as under: A) An end ....
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....nd agreements with different hotels for the purpose of booking rooms. This agent will book rooms in the hotel in the name of end customer and will issue tax invoice in the name of the applicant identifying the end customer as the consumer of service. The tax invoice will show the room rent along with applicable GST charged by the hotel and the charges for service provided by the Third Party Agent along with applicable GST. The applicant in his invoice issued to the customer will recover from the end customer the total amount charged by the Third Party Agent as 'reimbursement of hotel booking charges' and will charge the customer separately for the service provided by the applicant along with applicable GST on the latter amount. The applicant has not placed any proposed agreement or terms of agreement between him and the customer on the one hand and between him and the Third Party Agent on the other. 4.7 Now we will move to the concept of agent under the GST regime and how far the applicant's activity can be classified as one of an agent on the factual matrix. Section 2(5) of the CGST Act, 2017 defines an 'Agent' as a person including a factor, broker, commission agent, ....
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....n separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation. - For the purposes of this rule, the expression "pure agent" means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration. - Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee fo....
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....ivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.-For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given- (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in suc....
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....r charges any amount more than Rs. 10,000/-, then he will not be considered as a pure agent for the services of transport and the value of transport service will be included in the value of the supply of Customs Broker services by him. 4.11 Keeping in mind the discussions made in Paragraph no. 4.7 to 4.10 we will now apply the factual matrix of the case in our hand to the preceding discussions. Evidently the applicant will book the hotel rooms on behalf of the end customer after the end customer approaches the applicant for such booking. Of course, we have not been provided with the details of the agreement or contract between the end customer and the applicant in this respect. In absence of any such terms of agreement or contract, it can be presumed that the end customer is not aware of the kind of services that the applicant will require to take from others in order to provide the booking of room in a particular hotel on behalf of the end customer. The fact is that the applicant will place order to a Third Party Agent for booking of rooms in a particular hotel. The hotelier will, as per proforma invoice placed before us, charge the room rent along with applicable GST in ....
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.... in the course of supply of services and the applicant does not qualify for point (a) ibid. (B) As per the modus operandi described by the applicant, the booking agent will issue bill in the name of the applicant, not in the name of the end customer charging separately the amount paid for room booking and other amount as his service charge. Here the applicant becomes the recipient of supply of services provided by the Third Party Agent or the booking agent since the invoice is issued in his name. In our considered view, this invoicing pattern creates a scenario where the applicant holds the title to the services provided by the Third Party Agent. So point (b) of Explanation to Rule 33 ibid is not applicable as well. (C) As we have discussed, the applicant is holding the title to the services procured from Third Party Agent and as such he is said to have used the service for his own interest of providing services to the end customer. So, on this count also the applicant fails to satisfy point (c) of Explanation to Rule 33. (D) According to the facts placed before us, the applicant not only receives amount incurred for hotel room booking, but also for inter....