Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agentofthe recipient ofsupply shall be excluded from the value of supply,if all the following conditionsare satisfied, namely,-
(i) the supplier acts as a pure agent ofthe recipient of the supply, when he makes the paymentto the third party on authorisation by such recipient;
(ii) the payment made by the pure agent on behalfofthe recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service;
and ,
(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to theservices he supplies on his own account.
- Explanation.- Forthe purposesofthis rule, the expression “pure agent” means.a person who- _
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agentofthe recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amountreceived for supply he provides on his own account.
Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B.Otherthanits service fees, A also recovers from B,registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companiesfor the registration and approvalof the name are compulsorily levied on B. A is merely acting as a pure agent in the paymentof those fees.
Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply madeby A to B.