CA. Vipin Gupta (Accounts Officer) (146 Points)
24 February 2010No service tax on Reimbursement of expenses, if seperate bill is issued for actual expenditure.
i have two queries
1. whether above statment is correct
2. if yes, what is the notification No. or Circular No. or Section No. regarding the same
Pelase Help
Max Payne
(employed)
(2569 Points)
Replied 24 February 2010
Dear Sir,
I dont think that is true... It depends on nature of service rendered...
As of now, if the expense is necessary to render the service, it is part of Assessable value, and Service tax should be charged.
For Eg: CA or Lawyer buying stamp paper.
Amir
(Learner)
(4016 Points)
Replied 24 February 2010
Dear Vipin Sir,
The statement is incorrect........
Further if Service Tax could have been avoided on reimbursments simply by splitting bills then the Rules regarding Pure Agent would be of no use............
CA Priya
(CS Final)
(1049 Points)
Replied 24 February 2010
The statement is absolutely incorrect....... See the logical idea is if any exemption is there our professional will claim for reimbursement more than the bill for service......... He he......... Just kidding yer........ But no such concept in Service tax........
CMA Ramesh Krishnan
(Cost & Management Accountant)
(71479 Points)
Replied 24 February 2010
As per rule 5 .If the reimburement of expenses ( expenses incurred on behalf of service receiver) not includible in taxable service,if the reimburment in service provider business nature need to be include the taxable value of service
CA. Vipin Gupta
(Accounts Officer)
(146 Points)
Replied 25 February 2010
you all people are taking the question into wrong direction
Again read the question and read the concept of pure agent and only then give your opinion
Query : Service provider is Management Consultant he has incurred hotel and boarding expenses on providing management consultant service which will be reimbursed by service receiver on actual basis on production of proof of expenses.
Now give your opinion about service tax on this reimbursement
Max Payne
(employed)
(2569 Points)
Replied 25 February 2010
Dear Vipin Sir,
As per the provisions of section 67 of the Finance Act, "consideration" includes any amount that is payable for the taxable services provided or to be provided.
https://www.servicetax.gov.in/st-actmainpg.htm
ST Determination of Value rules, Rule 3(b), where the consideration is other than cash, it shall form part of taxable service....
The re-imbursement is also covered as part of consideration for rendering the service. Hence service tax chargeable as per sec 67 r/w rule 3. No circular or notification pointing otherwise.
Think this logic.
In case of import of goods clearing and forwading agent takes care of goods from the port to stores. He will incur lot of expenses from paying customs duty, vessel charges, etc till paying transport charges. He will make payment and get reimbursed.
I have seen a bill where his total claim was around 20 lakhs and his service charges was Rs.20,000. If he need to collect tax for total amount then service tax will be more than his service charge.
I think the statement is true. But i am not sure.
Please do reply.
In the bill which i saw they collected service tax only on Service charge and not on whole bill.
But the enlcosed bill for reimbursement has service tax collected by original service provider to the agent.
So i think if your service charges is in taxable net you need to collect service tax. No need to collect for reimbursement because the original provider woould have collected and remitted.
Max Payne
(employed)
(2569 Points)
Replied 25 February 2010
Dear Sathyanarayana,
Thats because only that much is the value of taxable service.... only gross charges for services provided are covered.
Max Payne
(employed)
(2569 Points)
Replied 25 February 2010
rite... for each service, the value of taxable service is defined or clarified by dept
Analysis of 20 GST Notices (including 2 Appeals) and Practise on Drafting(with recording)
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