Valuation of Supply between Principal and Agent under GST (2026): Rule 29
CA Meet Dhrangadhariya 
May 27, 2026
CA Meet Dhrangadhariya May 27, 2026
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Last updated: 25 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
A dealership arrangement, a commission sale, or any business routed through an agent raises a valuation question GST answers through a dedicated rule, since such a supply is taxable even though it often carries no ordinary sale price between the principal and the agent.
A principal is the person on whose behalf an agent carries on the business of supplying or receiving goods or services. A dealership store of an automobile company is a common example of this relationship.
An agent is defined widely to include a factor, broker, commission agent, arhatia (a term used in local agricultural markets), del credere agent, an auctioneer, or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services on another’s behalf. A del credere agent additionally guarantees the credit extended to the buyer, acting as both salesperson and guarantor.
Schedule I of the CGST Act treats a supply of goods between a principal and an agent as a supply even where the agent undertakes to supply (or receive) those goods on the principal’s behalf, without separate consideration passing between the two of them. This is why a valuation rule is needed at all - there is often no ordinary transaction price to fall back on.
Where goods are supplied by a principal to an agent, or by an agent to a principal, and the agent intends to further supply those goods, the value of the supply is, at the supplier’s option:
If neither of these can be determined, the value falls back to the cost method (generally 110% of the cost of production, manufacture or acquisition) or the residual method under the general CGST Valuation Rules.
Principal Mr. X supplies groundnuts to his agent, Mr. Y. Mr. Y subsequently sells groundnuts of like kind and quality to his own customers at Rs 5,000 per quintal. An independent, unrelated supplier, Mr. Z, sells groundnuts of like kind and quality to Mr. Y at Rs 4,550 per quintal.
The value of the supply made by Mr. X can be taken as either:
Both the agent and the principal are jointly and severally liable to pay the GST on such a supply - the tax authority is not restricted to recovering it from only one of the two parties.
Valuing stock routed through dealers, commission agents or consignment arrangements correctly under Rule 29 avoids disputes over under-valuation - please reach out to our team and we will be happy to assist with structuring and documenting these arrangements.
| Term | What it means |
|---|---|
| Principal | The person on whose behalf an agent supplies or receives goods or services. |
| Agent | A person (factor, broker, commission agent, auctioneer and similar) who carries on the business of supply or receipt of goods or services on another’s behalf. |
| Del credere agent | An agent who also guarantees the buyer’s credit to the principal, acting as both salesperson and guarantor. |
| Open market value | The full value a supply would fetch between unrelated parties dealing at arm’s length. |
| Goods of like kind and quality | Goods that are the same as, or closely resemble, the goods being valued, in characteristics, quality and reputation. |
| Residual method | A fallback valuation approach, applied using reasonable means consistent with the valuation principles, when none of the specific rules can determine a value. |
Yes. Schedule I of the CGST Act treats a supply of goods between a principal and an agent, where the agent undertakes to supply such goods on the principal’s behalf (or to receive them on the principal’s behalf), as a supply even without separate consideration.
A person, including a factor, broker, commission agent, arhatia, del credere agent, auctioneer, or any other mercantile agent, who carries on the business of supply or receipt of goods or services on behalf of another person (the principal).
Under Rule 29 of the CGST Rules, the value is either the open market value of the goods, or, at the supplier’s option, 90% of the price the agent charges an unrelated customer for goods of like kind and quality, where the agent intends to further supply those goods.
The value then falls back to the cost method (110% of the cost of production, manufacture or acquisition) or the residual method, under the general CGST Valuation Rules.
Both the agent and the principal are jointly and severally liable to pay the tax on such a supply.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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