What does this Section say?

Section 86 provides that when an agent supplies or receives taxable goods on behalf of a principal, both the agent and the principal can be held jointly and severally liable for GST payable on such goods.

In commercial practice, many businesses operate through commission agents, consignment agents, clearing agents, and other intermediaries. Since these agents often handle goods on behalf of the principal, the law ensures that tax liability cannot be avoided by shifting responsibility between the two parties.

Joint and several liability means that the department may recover dues from either the principal or the agent. Once one party pays the amount, the liability to that extent stands discharged. The provision is intended to safeguard revenue where goods are dealt with through representatives.

The section applies only where the agent acts on behalf of the principal in relation to taxable supplies. It does not automatically make every service provider liable for the principal's GST obligations.

Businesses operating through agents should maintain proper documentation, agreements, stock records, invoices, and GST compliance records. Clear identification of ownership and movement of goods helps avoid disputes regarding tax liability.

The objective of this provision is to ensure accountability in agency transactions and prevent leakage of revenue where taxable goods are supplied through intermediaries.

Example

A consignment agent sells goods on behalf of a manufacturer and GST remains unpaid. The department may recover the amount from either the manufacturer or the agent.

Key Points

• Applies to principal-agent transactions.
• Joint and several liability.
• Covers taxable goods handled through agents.
• Protects Government revenue.

In One Line

Both principal and agent may be liable for GST on goods supplied through an agency arrangement.