When GST was introduced, many professionals felt that valuation would be a straightforward job: just take the invoice value, apply GST, and that’s it. But in real business situations, invoices often include reimbursements, third-party payments, government fees, registration expenses, statutory charges, and other amounts that the supplier collects “on behalf of the client”.
If GST were charged on these items, the cost of compliance would shoot up and become unfair. That’s where the Pure Agent Concept under Rule 33 of the CGST Rules comes into play.
The Pure Agent concept is one of the most misunderstood areas in GST — especially for students, consultants, lawyers, corporate service providers, logistics companies, and even travel agents. But once you understand the logic and the three conditions, it becomes surprisingly easy.
This blog breaks everything down in a raw, human-style explanation, so even someone with zero background can understand it.
Let’s start with the basics.
1. Why Did GST Create the Pure Agent Concept?
Many service providers incur expenses on behalf of clients, such as:
- Paying government fees for filing a form
- Paying statutory charges during registration
- Paying freight or transport charges on customer’s behalf
- Paying airport taxes
- Paying property registration fees
- Paying license fees
- Paying courier charges
If GST were charged on these reimbursements, the cost of the service would artificially increase.
The Pure Agent rule ensures:
- No GST is charged on amounts paid as a pure conduit (pure agent).
- Only service fee/consideration is taxable.
This idea is simple:
A Pure Agent is like a messenger who pays expenses only because the client asked, not because it's part of their own service.
2. Meaning of Pure Agent Under GST
Rule 33 defines a Pure Agent as:
“A person who, on behalf of the recipient, incurs expenditure and gets reimbursed for such expenditure separately, and the expenditure is in fact the liability of the recipient.”
Meaning:
- You don’t own the expenditure
- You don’t benefit from that expenditure
- You merely “pass through” the amount
- You recover exactly the same amount from the client
The Pure Agent is not supplying those third-party services. He is simply paying money for the client.
3. Three Mandatory Conditions to Qualify as Pure Agent
To treat an expense as a pure agent reimbursement, all three conditions must be satisfied.
Let’s break them down in an easy, conversational way.
Condition 1: The supplier must act as a pure agent of the recipient when making payment
This means the supplier is paying the amount only as a representative, not as part of his own service.
Example:
- A CA firm paying ROC fees on behalf of a client
- A customs broker paying port charges for a client
- A travel agent paying visa fees on behalf of the passenger
The supplier is NOT buying anything for himself. He is paying in the name and for the benefit of the client.
Condition 2: The expenditure must be the actual liability of the recipient
This is the BIGGEST point students and businesses forget.
Ask this question:
- “If the agent didn’t pay, would the client still have to pay this amount?”
If the answer is YES → qualifies as pure agent. If the answer is NO → GST applies.
Example:
- A client must legally pay ROC fees → Pure agent
- A client must legally pay visa embassies → Pure agent
- A client must pay local authority registration fees → Pure agent
If the liability is NOT of the client, the reimbursement cannot be treated as pure agent.
Condition 3: The agent must recover the exact amount paid, without markup
The supplier must recover only the original amount, nothing extra.
- No profit
- No commission
- No margin
- No convenience fee
If any markup is added, that part becomes taxable.
Example:
- ROC fee paid: ₹5,000 → You recover ₹5,000
- Courier charges paid: ₹300 → You recover exactly ₹300
- If you recover ₹350 → FAIL (extra ₹50 taxable)
So the reimbursement must be actuals-only.
4. Expenses That Cannot Be Treated as Pure Agent
There are many misunderstandings here. The following items are NOT pure agent reimbursements under GST:
- Travel expenses
- Hotel stays
- Printing and stationery
- Administrative charges
- Out-of-pocket expenses
- Photocopies
- Office expenses
- Fuel charges
- Salary-related payments
A service provider may recover these costs, but they are part of his service" — not pure agent activities.
GST applies.
5. Diagram: Pure Agent Logic
Here is a simple diagram to memorize forever:
Agent Logic
If ANY answer is “NO” → GST applies on reimbursement.
6. Examples
Let’s solve this in the style most examiners expect: clear, structured, realistic examples.
Example 1 — ROC Fees (Classic Pure Agent)
A CA charges:
- Professional Fees = ₹10,000
- ROC Filing Fees = ₹6,000
ROC fee is the liability of the client.
Taxable Value = ₹10,000, ROC fee is excluded.
GST = 10,000 × applicable rate.
Example 2 — Courier Charges Paid on Behalf of Client
- Courier charges (actual) = ₹300
- Recovered from client = ₹300
Conditions met:
- Paid as agent
- Liability of client
- Recovered at actual
Taxable value excludes ₹300.
Example 3 — Courier Charges with Markup (NOT Pure Agent)
- Courier charges = ₹300
- Recovered = ₹350
Markup ₹50 → Clearly NOT pure agent.
Entire ₹350 becomes part of taxable value.
Example 4 — Travel Expenses (NOT Pure Agent)
A consultant incurs:
- Train ticket = ₹1,500
- Hotel = ₹3,000
- Meals = ₹500
Even though reimbursed separately, these are own business costs, not client liability.
Taxable value includes these amounts.
Example 5 — Degree Certificate Fees (Pure Agent)
A university hires an agency to process degree certificates.
- Agency pays Govt printing fee = ₹1,000
- Agency fee = ₹700
- Fee of ₹1,000 is liability of university → Pure agent
- Fee of ₹700 → Taxable
Example 6 — Customs Broker (Clear Example from PDF Logic)
A customs broker pays:
- Port charges = ₹8,000
- Customs duties = ₹20,000
These are the importer’s liability.
Broker also charges Service Fee = ₹5,000.
- Taxable Value = ₹5,000
- Port charges + duty excluded as pure agent.
Example 7 — License Fee Paid to Local Authority
- A consultant pays license fee: ₹4,000
- Professional fee: ₹8,000
- License fee = client’s liability → Pure agent
- Only ₹8,000 taxable.
Example 8 — Photocopy Charges Recovered
Photocopies are done by the service provider.
Even if billed separately:
- Photocopies = business expense
- Not client liability
Hence, taxable.
7. Checklist to Identify Pure Agent Transactions
Here’s the easiest checklist:
Was the payment made on behalf of the client?Was the amount legally the client’s liability?Was the amount recovered exactly (₹ to ₹)?Is it shown separately in invoice?Is there written agreement or verbal instruction?
If ALL are checked → Pure Agent.
8. Invoice Format Example (Correct GST Format)
A GST-compliant Pure Agent invoice must show:
Invoice Format
Everything under "Pure Agent" has NO GST.
9. What If a Supplier Mixes Pure Agent + Non-Pure Agent Items?
Very common mistake.
Example:
- Professional Fees = ₹8,000
- Courier Charges = ₹300
- Admin fee = ₹150
Check:
- Courier charges → pure agent ✔
- Admin fee → own expense ✔ taxable
Taxable value = 8,000 + 150 Courier = excluded
10. Pure Agent vs Reimbursement (Confusion Cleared)
Reimbursement = Any amount collected after making some expense.
Pure Agent = Reimbursement only when all 3 legal conditions are met.
Every pure agent is reimbursement. But not every reimbursement is pure agent.
11. Common Mistakes by Businesses
- Treating all reimbursements as pure agent
- Not obtaining written authorization
- Adding margin unknowingly
- Clubbing pure agent amounts with fee
- Not separating items in invoice
- Including travel & hotel costs as pure agent
These lead to GST demands in audits.
12. Why GST Department Cares So Much?
Because misuse of Pure Agent Rule leads to:
- Revenue leakage
- Artificially low taxable value
- Hidden margins
- Fraudulent reimbursements
So Rule 33 is strictly checked.
13. Final Summary (Cheat Sheet)
PURE AGENT:
- Pays expenses on behalf of client
- Expense is client's liability
- Recovers exact amount
- No benefit, no profit, no markup
- Shown separately in invoice
- GST not charged on pure agent amount
NOT PURE AGENT:
- Own business costs
- Markup added
- Expenses not client liability
- Travel, food, hotel, admin costs
Final Thoughts
The Pure Agent rule is actually a very balanced concept. It recognises that sometimes a supplier acts simply as a messenger or middleman for paying statutory fees or charges that would otherwise burden the recipient. But because people misused “reimbursement” under earlier tax laws, GST introduced a strict and clear three-condition test.
If you understand these three conditions and how to apply them (with the examples above), you will never get confused in exams or in practical situations.
