Sending goods to a commission agent, C&F agent or auctioneer does not automatically create a separate GST supply merely because the goods leave the principal's premises. The difficult case is when the intermediary is not just arranging a sale but is actually supplying or receiving the goods on behalf of the principal. Paragraph 3 of Schedule I can then treat the principal-agent movement as a supply even when no consideration passes between them.
The statutory starting point is Schedule I of the Central Goods and Services Tax Act, 2017 on the CBIC portal. CBIC then gives a practical test in Circular No. 57/31/2018-GST: look at the representative role of the agent and, especially, who issues the invoice for the further supply or receipt of the goods.
The Schedule I rule is narrower than the everyday meaning of “agent”
Schedule I covers two directions of goods movement: goods supplied by a principal to an agent where the agent undertakes to supply them on the principal's behalf, and goods supplied by an agent to the principal where the agent undertakes to receive them on the principal's behalf. The CBIC circular stresses that not every activity between a principal and an agent falls into this entry.
This matters because businesses use the word “agent” for many arrangements. A broker may introduce customers, an auctioneer may conduct bidding, a C&F operator may store goods, or a procurement consultant may locate vendors. Those commercial labels do not by themselves decide the Schedule I result. The GST question is whether the intermediary is acting in a representative capacity in the actual supply or receipt of the goods.
The invoice is the clearest operational test
CBIC identifies invoice issuance as the objective indicator. If the agent makes the onward supply of the principal's goods and issues the customer invoice in the agent's own name, the provision of those goods from the principal to the agent falls within the Schedule I principal-agent entry. The circular explains this as a case where the agent has authority to pass title to the goods on behalf of the principal.
If, instead, the intermediary arranges the transaction but the customer invoice is issued in the principal's name, the intermediary does not fall within this Schedule I entry for that goods supply. Possession of the goods, earning a commission or being called an agent in the contract is therefore not enough by itself.
Hypothetical example: Manufacturer P appoints Distributor A to find buyers for P's machines. P sends machines to A's warehouse. If A sells a machine and raises the sales invoice to the customer in A's own name while acting for P, the principal-to-agent goods movement falls within the Schedule I test described by CBIC. If A merely arranges the buyer and P raises the sales invoice directly to that buyer, A's facilitation role does not, by itself, bring that movement within paragraph 3 of Schedule I.
The same logic works on the procurement side
The rule is not limited to sales agents. Suppose a procurement intermediary identifies a supplier for the principal. If the supplier invoices the goods directly to the principal and the intermediary merely coordinates the purchase, CBIC's example treats the intermediary as outside the Schedule I agent test for receipt of those goods.
By contrast, where the intermediary receives or procures the goods on the principal's behalf and the goods are invoiced in the intermediary's own name before being provided to the principal, the arrangement can fall within the other limb of paragraph 3. The practical question remains the same: did the intermediary merely facilitate, or did it have authority to receive the goods and title on the principal's behalf?
Do not merge the goods movement with the agent's service fee
Circular 57/31/2018-GST expressly distinguishes the Schedule I goods rule from services between the principal and agent. Paragraph 3 concerns the specified supply of goods between them without consideration. A commission, auctioneering fee, handling fee or other agency service is a separate supply question and ordinarily depends on its own consideration and tax treatment.
This separation prevents two opposite errors. One is to assume that because the commission is taxable, every transfer of goods to the intermediary is also automatically a Schedule I supply. The other is to focus only on the commission invoice and miss a deemed goods supply where the agent is actually invoicing customers in its own name on the principal's behalf.
If Schedule I applies, value the principal-agent goods supply separately
A no-consideration supply still needs a taxable value. CBIC's official valuation rules page sets out the principal-agent valuation method. For goods supplied between a principal and agent, the value is the open market value; alternatively, where the recipient will make a further supply of like goods to an unrelated customer, the supplier may opt for 90% of the price charged by that recipient for goods of like kind and quality. If that value cannot be determined, the valuation rules move to the prescribed cost-based and residual methods.
Illustration: assume an agent sells like goods to unrelated customers for ₹10,000 per unit and the conditions for the 90% option are satisfied. The supplier may use ₹9,000 as the value under that option. This valuation exercise is distinct from the commission or service fee payable to the agent.
What the contract and ERP should make visible
The GST conclusion is easier to support when the commercial documents match the actual operating model. Before classifying an arrangement, trace one real transaction from dispatch to customer or supplier invoice rather than relying only on the agreement's label.
- Authority: record whether the intermediary can sell or receive goods on the principal's behalf and whether it can pass or receive title.
- Invoice identity: confirm whether the onward or procurement invoice is issued in the agent's own name or in the principal's name.
- Goods and services: keep the deemed goods-supply analysis separate from commission, auctioneering, logistics or other service charges.
- Valuation evidence: where Schedule I applies, retain support for open market value or for the 90% option used under the principal-agent valuation rule.
- Consistency: make sure the agreement, stock records, invoices, e-way documentation where applicable, accounting entries and GST reporting all describe the same commercial flow.
The key distinction is therefore not “agent versus non-agent” as a business label. It is whether the intermediary is actually supplying or receiving the goods on behalf of the principal in the manner contemplated by Schedule I. CBIC's invoice test gives finance teams a practical way to identify that boundary: an invoice in the intermediary's own name can indicate a Schedule I principal-agent supply, while an invoice in the principal's name generally points to a facilitation arrangement outside that specific deemed-supply entry.
