# Schedule I, Para 3: Principal–Agent Supply

## The Provision

Supply of goods (NOT services) without consideration is deemed supply in two scenarios:

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

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

> Important: Para 3 covers ONLY supply of goods, NOT services.

## Definitions

### Agent [Section 2(5)]

A person — including factor, broker, commission agent, arhatia, del credere agent, auctioneer, or any other mercantile agent — who carries on business of supply or receipt of goods/services ON BEHALF of another.

### Principal [Section 2(88)]

A person on whose behalf an agent carries on the business of supply or receipt of goods/services.

## The Crucial Test [Circular No. 57/31/2018 GST dated 04.09.2018]

Central Question: Does the agent have AUTHORITY to PASS or RECEIVE TITLE of goods on behalf of the principal?

Position	Para 3 Applicability
Agent issues invoice in HIS OWN NAME	Para 3 APPLIES → Deemed supply
Agent issues invoice in PRINCIPAL'S NAME	Para 3 does NOT apply

Similarly, if goods procured by the agent on behalf of the principal are invoiced in the name of the agent, provision of those goods to the principal IS covered.

## Decision Flow

Is there a principal-agent relationship? If Yes →
Does the agent have authority over title? If Yes →
In whose name is invoice issued?
Principal's name → NOT Para 3
Agent's own name → COVERED by Para 3

## Illustrative Scenarios (from Circular)

Scenario	Description	Para 3?
Bholu — Procurement Agent	Identifies suppliers; suppliers invoice Anmol (principal) directly	NOT covered
Mandaar — Auctioneer for Bank	Arranges auction; goods sold by Manimani Bank; invoice issued by Bank	NOT covered
Gambhir — Artist's Auctioneer	Auctions Gautam's painting; issues invoice in own name	COVERED
C&F / Commission Agent	Takes possession; issues invoice in own name	COVERED

## Why Only Goods?

Services, being intangible, cannot be 'passed' or 'received' the same way goods can. The legal nuance of 'title' fits goods.

## Key Memorising Anchor

'Invoice in agent's name = Deemed supply'. The test isn't whether the agent gets commission — it's whether the agent has the authority to issue invoice in their own name.

## Practical Application

When Para 3 applies:

Principal must issue a tax invoice to the agent (or vice versa) even though no consideration flows
Valuation rules for related/distinct persons or open market value apply

Worked example

### Example 1

Example 1 – Auctioneer issuing in own name: Sita sends gold ornaments to Aurum Auctioneers for sale. Aurum auctions the gold and issues invoices to buyers in Aurum's own name, then settles with Sita after deducting commission.

Aurum has authority over title → Para 3 covered
Sita → Aurum transfer is deemed supply
Sita must issue tax invoice to Aurum and pay GST

### Example 2

Example 2 – Pure facilitator (not under Para 3): Mr. Bholu introduces Anmol (buyer) to suppliers and earns commission. Goods invoiced directly from suppliers to Anmol.

Bholu never holds title or invoices in own name
Not a Para 3 transaction; Bholu's commission is separately taxable as service

### Example 3

Example 3 – C&F agent: ABC Ltd. (Mumbai) sends stock to C&F agent in Kolkata. C&F agent stores and sells to customers, issuing invoices in C&F's own name.

C&F has authority over title → Para 3 covered
Stock transfer from ABC to C&F = deemed supply

### Example 4

Example 4 – Bank auctioning own goods: Manimani Bank seizes property under SARFAESI and auctions through auctioneer Mandaar. Invoice issued by Bank directly to buyer.

Mandaar doesn't acquire title; invoice in Bank's name
Para 3 NOT applicable; Bank → buyer is normal supply

⚠️ Common exam mistakes

Treating ALL principal-agent arrangements as Para 3 supplies — the invoice-name test is decisive
Including supply of SERVICES under Para 3 — only goods are covered
Confusing pure commission/brokerage (NOT Para 3) with consignment/del credere relationships (IS Para 3)
Treating Para 3 as requiring consideration — deems supply EVEN WITHOUT consideration
Missing that Para 3 captures both directions: principal → agent AND agent → principal

Bare-Act text Schedule I, Para 3 read with Sections 2(5) and 2(88) · CGST Act, 2017 read with CBIC Circular No. 57/31/2018-GST dated 04.09.2018 · click to expand

Schedule I, Paragraph 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. Section 2(5): 'agent' means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. Section 2(88): 'principal' means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Schedule I Para 3 - Principal-Agent Supply

Worked example

⚠️ Common exam mistakes