A Del-credere agent (DCA) is a sales agent who acts a mediator between principal…

A Del-credere agent (DCA) is a sales agent who acts a mediator between principal and third party for supply of goods or services in lieu of commission. The very purpose of selecting the service of DCA by the principal is to ensure the payments from the purchaser. They contact with the potential buyers and arrange a deal between the principal and buyer for commission. The factor that separates a DCA from other agents is that the DCA makes a guarantee to the principal that if the buyer fails to pay the due amount then he (DCA) will compensate to the principal. In such a situation A DCA acts as a salesperson and also as an insurance agent at the same time. When the buyer fails to pay to the principal on due date The DCA makes payment to the principal and for this reason the commission of a DCA is higher than the other agents. In order to ensure timely payment to the supplier the DCA can resort to various methods including Ø Providing short-term transaction-based loans to the buyer to pay to the principal or Ø On due date paying the supplier himself and later on recovering the amount from the buyer with some interest. The buyer pays this lon to DCA at a mutually agreed interest rate. There is a doubt regarding the valuation of supplies from Principal to recipient where the payment for such supply is being discharged by the recipient through the loan provided by DCA or by the DCA himself. In this situation following questions are worth mentioning- Recommended read- Commission Agent under GST- complete guide A). whether scope of agent as mentioned in Para 3 of Schedule I of the CGST Act covers DCA? It has already been clarified that whether a DCA shall fall under Para 3 of Schedule I or not can be analysed under two scenarios- Ø Where invoice is raised by the principal in his own name either himself or through DCA the DCA does not fall under the domain of agent as mentioned in Para 3 of Schedule I. Ø Where invoice for supply is raised by DCA in his name then DCA falls under the domain of agent as mentioned in Para 3 of Schedule I. B). where DCA is not an agent under Para 3 of Schedule I of the CGST Act Whether the temporary short-term transaction based loan provided by the DCA to the buyer (for which interest is charged by the DCA) is to be included in the value of goods being supplied by the principal ? In such a scenario following activities are taking place: 1. Supply of goods from principal to recipient; 2. Supply of agency services from DCA to the supplier or the recipient or both; 3. Supply of extension of loan services by the DCA to the recipient. It is clarified that in cases where the DCA is not an agent under Para 3 of Schedule I of the CGST Act the temporary loan being provided by DCA to the buyer is a supply of service by the DCA to the recipient on Principal to Principal basis and is an independent supply. This temporary loan shall not be included in the value of goods supplied by principal. Therefore the interest being charged by the DCA would not form part of the value of supply of goods supplied (to the buyer) by the supplier. It may be noted that vide notification No. 12/2017-Central Tax (Rate) (Sl. No. 27) services by way of extending deposits loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) has been exempted. C). where DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the value of goods being supplied whether the interest will form a part of the value of supply of goods also or not? In such a scenario following activities are taking place: 1. Supply of goods by the supplier (principal) to the DCA; 2. Further supply of goods by the DCA to the recipient; 3. Supply of agency services by the DCA to the supplier or the recipient or both; 4. Extension of credit by the DCA to the recipient. It is clarified that in cases where the DCA is an agent under Para 3 of Schedule I of the CGST Act the temporary credit being provided by DCA to the buyer shall not be regarded as an independent supply and shall be included in the supply of the goods by the DCA to the recipient because loan provided by DCA is in the context of the supply of goods made by the DCA to the recipient. Further the amount of interest charged for such credit shall also be required to be included in the value of supply of goods by DCA to the recipient as per section 15(2)(d) of the CGST Act.

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