Principal agent relationship under gst
This query is : Resolved
08 September 2018
Dear Experts,
Wanted your opinion regarding the implication if an Agent does not make GST payments for the sales carried out by his principal.
Is there any exposure to the principal - can the Department demand the tax from the Principal?
Additionally, is there an option for the principal to directly make the payment and file the returns on behalf of the agent (under the GSTIN of the principal itself)?
Wanted your opinion regarding the implication if an Agent does not make GST payments for the sales carried out by his principal.
Is there any exposure to the principal - can the Department demand the tax from the Principal?
Additionally, is there an option for the principal to directly make the payment and file the returns on behalf of the agent (under the GSTIN of the principal itself)?
09 September 2018
Liability to pay HST is on registered person. it is always the liability of principal to pay GST. agent paying gst i s just discharging the liability of principal. agent paying on behalf of principal. if not pricipal himself should discharge his liability
11 September 2018
But what is the procudure? Invoice has been issued under the GSTIN of the agent. Payment and Returns can thus be made only under his GSTIN. Is there any process to file those data under Principal's GSTIN as well?
10 August 2024
Under the Goods and Services Tax (GST) regime in India, the principal-agent relationship has specific implications for tax liabilities and compliance. Here’s a detailed overview of how GST operates in this context and the procedures involved:
### **1. GST Liability in Principal-Agent Relationship**
**Responsibility for GST Payment:**
- **Agent's Responsibility:** According to the GST Act, the agent is responsible for paying GST on the sales made on behalf of the principal. The agent must file GST returns and make GST payments under their own GSTIN.
- **Principal's Liability:** If the agent fails to make GST payments or file returns, the tax authorities can indeed demand the tax from the principal. This is because, ultimately, the principal is liable for the correct payment of GST and compliance.
**Legal Framework:**
- **Section 22 and 24:** Under Section 22 and 24 of the CGST Act, a person who is engaged in the business of making taxable supplies is required to obtain GST registration and comply with GST provisions, including payment of tax and filing returns.
- **Section 39(3):** Specifically for agents, Section 39(3) of the CGST Act provides that the principal shall be liable to pay tax on behalf of the agent if the agent fails to do so.
### **2. Principal Making Payment on Behalf of Agent**
**Options for Principal:**
- **Direct Payment by Principal:** If the agent fails to pay the GST, the principal has the option to make the payment directly. However, this does not automatically allow the principal to file returns under the agent’s GSTIN.
**Procedure for Direct Payment and Filing Returns:**
1. **Payment Process:**
- The principal can pay the GST directly to the government treasury by identifying the correct amount of tax payable for the transactions carried out by the agent.
- **Payment Reference:** Ensure that the payment reference includes details relevant to the transactions, which might be under the agent’s GSTIN.
2. **Filing Returns:**
- **Agent’s GSTIN:** Returns should be filed under the GSTIN of the agent as that is where the tax liability is recorded.
- **Principal’s GSTIN:** The principal cannot file the returns directly under their GSTIN for transactions carried out by the agent. Returns and GST payments should align with the GSTIN under which the invoices were issued.
**Procedure for Correcting the Situation:**
- **Correction Process:** If the agent has not complied, the principal should:
1. **Pay the Tax:** Pay the due GST amount to the government using the agent's GSTIN.
2. **Inform Authorities:** Notify the GST authorities about the issue and the payment made by the principal on behalf of the agent. This may involve a formal request or clarification to ensure that the principal’s compliance is recognized.
**Filing Under the Agent’s GSTIN:**
- **Correct Filing:** The principal cannot file returns directly under the principal’s GSTIN for transactions done by the agent. The agent must file the GST returns and include the transactions as per the GSTIN under which the sales were made.
### **3. Practical Steps for the Principal**
1. **Ensure Compliance:** Regularly check that the agent is complying with GST provisions, including making timely payments and filing returns.
2. **Audit Records:** Keep thorough records and documentation of transactions and payments made on behalf of the agent.
3. **Consult GST Authorities:** If there is an issue with the agent's compliance, consult the GST authorities for guidance on how to handle the situation and rectify it.
### **Summary:**
- **GST Payment:** The agent is responsible for GST payment and filing returns under their GSTIN. If the agent fails, the principal can make the payment, but the returns must still be filed under the agent’s GSTIN.
- **Principal’s Liability:** The principal can be held liable for unpaid GST if the agent does not comply. However, the process of filing and compliance must be followed as per the GSTIN under which the transactions are recorded.
**Consulting a GST expert or tax advisor** is advisable to navigate complex situations and ensure proper compliance with GST regulations.
### **1. GST Liability in Principal-Agent Relationship**
**Responsibility for GST Payment:**
- **Agent's Responsibility:** According to the GST Act, the agent is responsible for paying GST on the sales made on behalf of the principal. The agent must file GST returns and make GST payments under their own GSTIN.
- **Principal's Liability:** If the agent fails to make GST payments or file returns, the tax authorities can indeed demand the tax from the principal. This is because, ultimately, the principal is liable for the correct payment of GST and compliance.
**Legal Framework:**
- **Section 22 and 24:** Under Section 22 and 24 of the CGST Act, a person who is engaged in the business of making taxable supplies is required to obtain GST registration and comply with GST provisions, including payment of tax and filing returns.
- **Section 39(3):** Specifically for agents, Section 39(3) of the CGST Act provides that the principal shall be liable to pay tax on behalf of the agent if the agent fails to do so.
### **2. Principal Making Payment on Behalf of Agent**
**Options for Principal:**
- **Direct Payment by Principal:** If the agent fails to pay the GST, the principal has the option to make the payment directly. However, this does not automatically allow the principal to file returns under the agent’s GSTIN.
**Procedure for Direct Payment and Filing Returns:**
1. **Payment Process:**
- The principal can pay the GST directly to the government treasury by identifying the correct amount of tax payable for the transactions carried out by the agent.
- **Payment Reference:** Ensure that the payment reference includes details relevant to the transactions, which might be under the agent’s GSTIN.
2. **Filing Returns:**
- **Agent’s GSTIN:** Returns should be filed under the GSTIN of the agent as that is where the tax liability is recorded.
- **Principal’s GSTIN:** The principal cannot file the returns directly under their GSTIN for transactions carried out by the agent. Returns and GST payments should align with the GSTIN under which the invoices were issued.
**Procedure for Correcting the Situation:**
- **Correction Process:** If the agent has not complied, the principal should:
1. **Pay the Tax:** Pay the due GST amount to the government using the agent's GSTIN.
2. **Inform Authorities:** Notify the GST authorities about the issue and the payment made by the principal on behalf of the agent. This may involve a formal request or clarification to ensure that the principal’s compliance is recognized.
**Filing Under the Agent’s GSTIN:**
- **Correct Filing:** The principal cannot file returns directly under the principal’s GSTIN for transactions done by the agent. The agent must file the GST returns and include the transactions as per the GSTIN under which the sales were made.
### **3. Practical Steps for the Principal**
1. **Ensure Compliance:** Regularly check that the agent is complying with GST provisions, including making timely payments and filing returns.
2. **Audit Records:** Keep thorough records and documentation of transactions and payments made on behalf of the agent.
3. **Consult GST Authorities:** If there is an issue with the agent's compliance, consult the GST authorities for guidance on how to handle the situation and rectify it.
### **Summary:**
- **GST Payment:** The agent is responsible for GST payment and filing returns under their GSTIN. If the agent fails, the principal can make the payment, but the returns must still be filed under the agent’s GSTIN.
- **Principal’s Liability:** The principal can be held liable for unpaid GST if the agent does not comply. However, the process of filing and compliance must be followed as per the GSTIN under which the transactions are recorded.
**Consulting a GST expert or tax advisor** is advisable to navigate complex situations and ensure proper compliance with GST regulations.
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