Loading & unloading charges, other exp. incurred

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 April 2012 LOADING & UNLOADING CHARGES, OTHER EXP. INCURRED ON BEHALF OF CONSIGNEE/CONSIGNER AND THERE AFTER REIMBURSED FROM HIM WITH FRIEGHT CHARGES-
WHAT IS TREATMENT OF THESE ABOVE CHARGES ADDED WITH FRIEGHT CHARGES IN SERVICE TAX ON GOODS TRANSPORTED BY ROAD? PLEASE SPECIFY CIRCULAR, NOTIFICATION OR NOTE, IF ANY.

CA Ankit Gulgulia (Jain)

CA Ankit Gulgulia (Jain) (Expert)
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19 April 2012 It will be exempt from Service tax if it satisfies all the eligibity requirements of pure agent reimbursments

As per rule 5 (Inclusion in or exclusion from value of certain expenditure or costs), the benefit of re-imbursement of expenses i.e. exclusion of expenses can be claimed by the pure-agent only.

In case, an expenditure incurred by the GT Agent in a capacity other than pure agent, no deduction shall be allowed.

Explanation 1 of rule 5, defines the pure agent as:

For the purposes of sub- rule (2), "pure agent" means a person who-

(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service;

(b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;

(c) does not use such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services.

and the expenses that will be excluded from service tax are as mentioned below
if all the following conditions are satisfied, namely:-

(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;

(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;

(iii) the recipient of service is liable to make payment to the third party;

(iv) the recipient of service authorises the service provider to make payment on his behalf;

(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;

(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;

(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and

(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.

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