Service tax Credit on Reimbursement

This query is : Resolved

Sachin Jain CA, CS, CWA (Querist)
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07 August 2009 If We are making payment to our C&F Payment for various services. Along with various other payments we are making reimbursements for the amount he is paying to the security services. The security service provider is charging service tax on the invoice raised in the name of C&F agent. We are not able to take the credit of service tax paid by C&F agent to Security Service Provider inspite of the fact that we are reimbursing the whole amount (Incl. Service Tax).

Is there any way by which we can take the credit? It is not possible to get the invoice in our name as there is no contract between us & the Security Service provider. Please support by Act / Notification / Circular / Court Decision etc.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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08 August 2009 It is asumed that you are reimbursing the amount separately for the security. If so ask the security to specifically mention where the service is provided in the bill raised for services to you on your C&F. Take a certificate from C&F that he has padi the security fully and that does not avail the credit.
Write to dept giving details of this transaction and intimate that you propose to avail the credit.
You would be admissible in such a case.

SARATHY RP

SARATHY RP (Expert)
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08 August 2009 Dear Mr Jain,

The provision of security to the goods stored in a ware house is a part of your c&F's service to you. Hence, this is not a reimbursement by you to your service provider as per Rule 5 (1) of Service Tax (Determination of Value) Rules, 2006. To satisfy a resimbursement, your C & F has to prove 8 conditions listed in Rule No. 5 (2). To my knowledger any C & F cannot satisfy these criterias.

Hence, it is advisable to include the security charges as a part of C & F Agency service charges and avail / utilise CENVAT credit.
Thanks.
Sarathy

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Dilip Darji

Dilip Darji (Expert)
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08 August 2009 As per latest Valuation Rules 5(1) w.e.f 01/06/2007, where any expenditure or coat are incurred by the service provider in the course of providing taxable service, all such expenditure or cost shall be treated as consideration for the taxable service provided or to be provoded and shall be included in the value for the purpose of chargiong setvice tax on the said service , except those incurred as a "pure agent" which satsisfy the requirement prescribed under rule 5 (2).

That means that CHA has to charge Service Tax on all expenses incurred by him, during providing service and you can very well avail Service Tax credit for the service tax charged by him.

CHA can avail Service Tax credit to the extent of Service Tax paid by him to the Security agency.And pay Service Tax on his output srrvice.

We hope that thi shall meet with your requirement.