# Principal–Agent Supply [Para 3 of Schedule I]

## The Rule

Supply of goods (NOT services) without consideration is treated as supply in two situations:

1. Principal → Agent, where the agent undertakes to supply such goods on behalf of the principal.

2. Agent → Principal, where the agent undertakes to receive such goods on behalf of the principal.

> ⚠️ Only goods are covered – supply of services between principal and agent is NOT covered by Para 3.

## Key Definitions

Agent [Section 2(5)]: A person — including factor, broker, commission agent, arhatia, del credere agent, auctioneer or any other mercantile agent, by whatever name called, who carries on business of supply or receipt of goods/services on behalf of another.
Principal [Section 2(88)]: Person on whose behalf the agent carries on the business of supply or receipt.

## The Crucial Test (Circular No. 57/31/2018-GST)

Does the agent have authority to pass or receive the title of the goods on the principal's behalf?

Invoice Issued In	Treatment
Agent's own name	Falls under Para 3 (deemed supply)
Principal's name	Does NOT fall under Para 3

The same logic applies when goods are procured by the agent for the principal.

## Del-credere Agent (DCA) [Circular No. 73/47/2018-GST]

Meaning: A selling agent who not only finds buyers but also guarantees payment to the principal. If the buyer defaults, the DCA pays the principal (in return for a higher commission). DCA may also extend short-term loans to buyers.

### Clarifications:

Issue	Position
Is DCA an agent under Para 3?	Yes, only if DCA issues invoice in his own name.
Interest on short-term loan from DCA to buyer (DCA is NOT a Para 3 agent)	Independent supply of service (principal-to-principal). Not part of value of supply by principal.
Interest on short-term loan from DCA to buyer (DCA IS a Para 3 agent)	Interest loses its independent character; included in value of supply by DCA to recipient u/s 15(2)(d).

Worked example

### Example 1

Bholu (Procurement Agent): Bholu only identifies suppliers and instructs them to invoice Anmol directly. Bholu never receives/supplies goods. → NOT covered by Para 3.

### Example 2

Mandaar (Bank Auctioneer): Mandaar arranges an auction but the goods are sold by Manimani Bank and the invoice is issued by the Bank. → NOT covered.

### Example 3

Gambhir (Artist's Auctioneer): Gambhir auctions Gautam's painting, issues invoice in his own name and delivers the painting. → COVERED under Para 3.

### Example 4

C&F / Commission Agent: Takes possession of goods and issues invoice in own name — irrespective of whether principal is disclosed. → COVERED.

### Example 5

Kavi – APMC Commission Agent: If Kavi issues the invoice to the buyer → covered. If Ravi (the farmer/principal) issues the invoice → Kavi is NOT covered. Treatment is conditional on who invoices.

⚠️ Common exam mistakes

Applying Para 3 to services — Para 3 is restricted to GOODS only.
Looking only at whether possession was transferred — the real test is who issues the invoice (authority to pass/receive title).
Treating every commission agent as a Schedule I agent — a pure broker who only introduces parties is NOT covered.
For Del-credere agents: forgetting to include interest in value of supply when DCA itself qualifies as a Para 3 agent.

Bare-Act text Schedule I, Para 3 read with Section 2(5) and Section 2(88) · CGST Act, 2017 · click to expand

Schedule I, Para 3 – Supply of goods — (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

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Principal-Agent Supply without Consideration [Para 3 of Schedule I]

Worked example

⚠️ Common exam mistakes