Key Highlights of Circular No. 73/47/2018

2025-03-03 08:45:11 02March

02March

Key Highlights of Circular No. 73/47/2018 - GST

<h2><strong>1. Who is a Del-Credere Agent (DCA)?</strong></h2><p>A <strong>Del-Credere Agent (DCA)</strong> is a <strong>selling agent</strong> appointed by a supplier (principal) to facilitate sales by connecting buyers. The unique aspect of a <strong>DCA</strong> is that they <strong>guarantee payment</strong> to the principal even if the buyer defaults.</p><p>A <strong>DCA may also extend short-term loans</strong> to buyers or pay the supplier directly, recovering the amount from the buyer later with an interest charge.</p><hr><h2><strong>2. GST Applicability on Principal-Agent Relationship</strong></h2><p>The <strong>classification of a DCA under GST depends on how invoices are issued</strong> in a transaction.</p><figure class="table"><table><thead><tr><th><strong>Scenario</strong></th><th><strong>Is DCA an Agent under GST?</strong></th></tr></thead><tbody><tr><td><strong>Invoice is issued by the supplier to the buyer (either directly or via DCA).</strong></td><td><strong>DCA is NOT considered an agent</strong> under Schedule I of CGST Act.</td></tr><tr><td><strong>Invoice is issued by the DCA in their own name to the buyer.</strong></td><td><strong>DCA is considered an agent</strong> under Schedule I of CGST Act.</td></tr></tbody></table></figure><hr><h2><strong>3. GST Treatment for Loan/Interest Charged by DCA</strong></h2><p>A <strong>DCA may provide short-term loans</strong> to buyers and charge interest. The GST treatment depends on whether the <strong>DCA is classified as an agent or not</strong>.</p><h3><strong>Case 1: When DCA is NOT an Agent</strong></h3><ul><li>The loan given by the DCA to the buyer is <strong>considered an independent supply of financial service</strong>.</li><li><strong>Interest charged on such a loan is exempt from GST</strong> as per <strong>Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017</strong>.</li><li>The interest amount <strong>will not be included</strong> in the value of goods supplied.</li></ul><h3><strong>Case 2: When DCA is an Agent</strong></h3><ul><li>The loan provided by DCA to the buyer is <strong>not considered a separate supply</strong>.</li><li>The <strong>interest charged must be included</strong> in the value of goods supplied as per <strong>Section 15(2)(d) of the CGST Act</strong>.</li><li>In this case, <strong>GST will be levied on the total value, including the interest</strong>.</li></ul><hr><h2><strong>4. Summary of GST Implications on DCA Transactions</strong></h2><figure class="table"><table><thead><tr><th><strong>Aspect</strong></th><th><strong>DCA as an Independent Party (Not an Agent)</strong></th><th><strong>DCA as an Agent</strong></th></tr></thead><tbody><tr><td><strong>Invoice Issued By</strong></td><td>Supplier (Principal)</td><td>DCA</td></tr><tr><td><strong>Loan Given by DCA</strong></td><td>Considered a separate financial service</td><td>Part of the goods supply</td></tr><tr><td><strong>Interest Charged on Loan</strong></td><td>Exempt from GST (Not included in goods value)</td><td>GST applicable (Included in goods value)</td></tr><tr><td><strong>Reference GST Law</strong></td><td>Notification 12/2017-Central Tax (Rate)</td><td>Section 15(2)(d) of CGST Act</td></tr></tbody></table></figure><hr><h2><strong>5. Trade Notices & Implementation</strong></h2><ul><li><strong>CBIC has directed tax authorities</strong> to issue trade notices to ensure clarity and awareness.</li><li>Any <strong>challenges in implementation</strong> should be reported to CBIC.<a href="https://cms.plasament.com/storage/shubham-pathak/circular-no-73.pdf">circular-no-73</a><br><br> </li></ul>