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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Value of Supply

Sharma Traders and Verma Distributors have no other connection, but Verma Distributors is the sole distributor of Sharma Traders' goods. For the purposes of Section 15 of the CGST Act, 2017, how are they treated?

They are deemed related. Clause (c) of the Explanation to Section 15 treats persons associated in business as sole agent, sole distributor or sole concessionaire of one another as related, regardless of any shareholding or the nature of the price.

  1. ARelated, because one is the sole distributor of the otherCorrect
  2. BNot related, because a distributor is an independent buyer
  3. CRelated only if Verma holds at least 25% of Sharma's shares
  4. DRelated only if the price is not the sole consideration

Explanation

Clause (c) of the Explanation deems persons associated as sole agent, sole distributor or sole concessionaire of each other to be related. No shareholding is needed. The price condition is a separate test for transaction value, not for relationship.

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