Rule 56 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
An agent handles other people's goods for other people's account. The accounting requirement follows that reality: not one set of books, but one set per principal.
Rule 56(11): every agent referred to in clause (5) of section 2 shall maintain accounts depicting — (a) particulars of authorisation received from each principal to receive or supply goods or services on behalf of such principal, separately; (b) particulars including description, value and quantity of goods or services received on behalf of every principal; (c) the same for goods or services supplied on behalf of every principal; (d) details of accounts furnished to every principal; and (e) tax paid on receipts or on supply effected on behalf of every principal.
Who is an agent
Section 2(5): "agent" means a person, including a factor, broker, commission agent, arhatia, 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 or both on behalf of another.
The definition is by function, not by title. A person calling itself a distributor may be an agent, and a person calling itself an agent may be buying and selling on its own account.
Circular No. 57/31/2018-GST supplies the operative test: whether the agent has the authority to pass or receive the title in the goods on behalf of the principal, and in practice, whether the invoice for the further supply is issued by the agent in his own name.
Clause (a): the authorisation
Listed first, and it is the foundation.
The authorisation is what establishes the agency. Without it:
- the Schedule I paragraph 3 deeming does not apply, because the agent did not undertake to supply on behalf of the principal;
- the movement of goods to the agent is either an ordinary supply or not a supply at all;
- the Rule 29 valuation, with its 90% option, has no basis. Rule 29: valuing a supply through an agent →
It must be maintained separately for each principal, and it should record what the agent is authorised to do — receive, supply, or both — and on what terms.
Clauses (b) and (c): the flows
Received on behalf of each principal — description, value and quantity, where applicable.
Supplied on behalf of each principal — the same.
Two points:
"Where applicable" attaches to quantity, not to description or value. A services agent records description and value even where quantity is meaningless.
The records are per principal, so an agent handling twenty principals maintains twenty sets. A single consolidated inventory does not satisfy the rule, however accurate it is.
Clause (d): accounts furnished to the principal
The statements the agent renders to each principal — sales statements, remittance advices, stock statements.
This is the reconciliation point. The principal's books, the agent's records and the accounts furnished should agree, and where they do not, the difference is the first thing an officer examines.
Clause (e): tax paid on behalf
Tax paid on receipts or on supply effected on behalf of every principal.
Where the agent is registered and supplies in its own name, the tax on the onward supply is the agent's liability, and the principal's supply to the agent is a separate taxable event under Schedule I paragraph 3. Clause (e) records the connection between the two.
The related provisions
Section 86 — liability of agent and principal. Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall, jointly and severally, be liable to pay the tax payable on such goods.
Note the limitation: "taxable goods". Section 86 does not, on its terms, extend joint and several liability to services.
Section 122(1)(vii) penalises a person who takes or distributes input tax credit in contravention of section 20 — relevant where an agency arrangement is confused with an ISD one.
Rule 56(5)(c) requires the address of the premises where goods are stored, which for an agency arrangement includes the agent's premises where the principal's goods lie. Undeclared storage taxed as supplied →
Practical notes
- Get the authorisation in writing, per principal, and keep it current.
- Segregate stock physically and in records by principal — a mixed store cannot produce per-principal accounts.
- Reconcile the accounts furnished to each principal against the agent's own records, monthly.
- Decide the characterisation deliberately. Whether the agent invoices in its own name determines whether Schedule I paragraph 3 applies, and both parties must treat it consistently.
- Principals should declare the agent's premises as a storage location under Rule 56(5)(c), or ensure the agent's Rule 58 records cover the stock. Rule 58: transporter and warehouse enrolment →
- A del credere agent guaranteeing payment supplies an additional service, valued and taxed separately.
Key takeaways
- Rule 56(11) requires five records, per principal.
- The authorisation comes first and is what establishes the agency.
- Section 2(5) defines an agent by function, covering factors, brokers, commission agents, arhatias, del credere agents and auctioneers.
- Circular 57/31/2018-GST turns on whether the agent invoices the ultimate customer in its own name.
- Section 86 makes agent and principal jointly and severally liable for tax on taxable goods.
- The accounts furnished to the principal are the reconciliation point.
Read next
- Rule 29: Valuing a Supply Made Through an Agent
- Invoicing Through Agents and Between Branches
- Rule 56: The Accounts Every Registered Person Must Keep
- Section 86 CGST Act: Agent and Principal
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and Circular No. 57/31/2018-GST.