One of my client is an CNF agent. He does the selling on behalf of companies. He get all the expenses reimbursed from the company. He additionally charged commission to the company.
Want to confirm whether we should charged service tax on reimbursement? Please provide the circular if any.
Also to let you know that we charged the service on commission.
There is no service tax on re-imbursements as there is no services involved in the re-imbursements.
Further proper supportings in need to be attached for claiming re-imbursements else it shall be treated as a fee and thus service tax / TDS both shall become applicable.
08 July 2008
Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as ‘consideration for the taxable service provided or to be provided’, and shall be included in the value for the purpose of charging service tax on the said service, if the expenditure or costs are reimbursed by the Service recipient. Ø The value of the taxable service will not include the expenditure or costs incurred by the service provider as a pure agent of the recipient of service only if all the following conditions are satisfied: l The service provider acts as a pure agent of the recipient of service whenhe makes payment to third party for the goods or services procured; l 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; l The recipient of service is liable to make payment to the third party; l The recipient of service authorises the service provider to make payment on his behalf; l 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; l 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; l The service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and l The goods or services procured by the service provider from the third party as a pure agent of the recipient of serviceare in addition to the services he provides on his own account.
Any person is to be called as a ‘Pure Agent’ only if there is an agreement between the agent and the service recipient. There shall be an authorization to incur expenditure or costs in the course of providing taxable service by virtue of the contractual agreement. He should neither intend to hold nor hold any title to the goods or services so procured or provided in his capacity as pure agent of the recipient of service; and he should not use such goods or services so procured
CAclubindia
