VAT on reimbursement charges

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kartik_somu (Querist)
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10 December 2007 Our company caterer incurred certain repair charges which we were supposed to reimburse.
He raised invoice for reimbursement. He got the repairs done by a service centre and produced invoice raised by that service centre as supporting.
The service centre had charged VAT @ 0.5 %.
In the invoice raised by the caterer, he has charged VAT @ 4 %.
Should VAT be paid on reimbursement when it is very clear that the caterer is not making any profit out of that transaction.

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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10 December 2007 What I could understand from your question is this_

Your caterer paid some amount to one dealer for repairing on which VAT @ 0.5% has been charged.

You are to reimburse the expenses as per terms of your contract. In this repairing, your caterer has sold (including deemed sales) nothing to you.

I don think that the caterer should raise any bill on you. Rather he should issue a debit note on you on the nasis of bill of repairer. Here your caterer will be assumed to work as your agent in making the payment to Repaireres.
Accordingly, no reason of charging VAT separately by the cateror.