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Expenses reimbursement Debit Note raised to Sister concern

Rajkumar P (Manager - Accounts) (4 Points)

28 August 2024

Parent companies account for the expense with GST and to be raised the debit Note to Sister concerns reimbursement expenses with GST or without GST. Please clarify

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Money Money (429 Points)
Replied 29 August 2024

When a parent company accounts for an expense with GST and raises a debit note to its sister concerns for reimbursement of expenses, the GST treatment depends on the nature of the expenses and the applicable GST rules. Here are the scenarios:

Reimbursable Expenses with GST:

If the expenses incurred by the parent company include GST (e.g., input tax credit (ITC) on purchases), the debit note raised to the sister concerns should also include GST.

The sister concerns can claim ITC on the GST charged in the debit note, provided they are eligible to do so.

Reimbursable Expenses without GST:

If the expenses incurred by the parent company do not include GST (e.g., non-GST expenses like salaries, rent, etc.), the debit note raised to the sister concerns should not include GST.

In this case, the sister concerns cannot claim any ITC because there is no GST component.

Remember that the GST treatment should align with the actual nature of the expenses.

Feel free to ask if you need further clarification! 😊🌟