Reimbursement of Expenses incurred by Agent who is not charging GST on his invoice, the recipient needs to be pay GST under RCM?

whether Fixed allowances to employee without any supporting documnets are taxable under GST under RCM?. The said allowances are not included in the salary of the employee for income tax purpose.

As per rule 7 of Draft Determination of Value of Supply Rules the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the following conditions are satisfied:-

1. The supplier acts as a pure agent of the recipient of the supply, when he makes payment to the third party for the services procured as the contract for supply made by third party is between third party and the recipient of supply.

2. The recipient of supply uses the services so procured by the supplier service provider in his capacity as pure agent of the recipient of supply.

3. The recipient of supply is liable to make payment to the third party.

4. The recipient of supply authorizes the supplier to make payment on his behalf.

5. The recipient of supply knows that the services for which payment has been made by the supplier shall be provided by the third party.

6. The payment made by the supplier on behalf of the recipient of supply has been separately indicated in the invoice issued by the supplier to the recipient of service.

7. The supplier recovers from the recipient of supply only such amount as has been paid by him to the third party and

8. The services procured by the supplier from the third party as a pure agent of the recipient of supply are in addition to the supply he provides on his own account.

Pure agent means a person who:-

a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both.

b) Neither intends to hold nor holds any title to the goods or services or both so procured or provided as pure agent of the recipient of supply

c) Does not use for his own interest such goods or services so procured and

d) Receives only the actual amount incurred to procure such goods or services.

Illustration: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to Registrar of the Companies. The fees charged by the Registrar of the companies registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

I am a distributor of fmcg co. I do expenses on behalf of co. Like payments to unregistered retailers for display of goods Now co. is asking to raise gst service invoice in their name Adding 18%gst for reimbursement from them Now if i raise the invoice it will be shown as income in P/l a/c. Which is actually not my income. To nullnify it effect i have to show it expense as diplays paid If the amount is rs 90000 ,rcm is applicable or not If not please tell..

I am a distributor of fmcg co. I do expenses on behalf of co. Like payments to unregistered retailers for display of goods Now co. is asking to raise gst service invoice in their name Adding 18%gst for reimbursement from them Now if i raise the invoice it will be shown as income in P/l a/c. Which is actually not my income. To nullnify it effect i have to show it expense as diplays paid If the amount is rs 90000 ,rcm is applicable or not If not please tell..

Yes, deepak sir RCM is appliciable (5000) limit and as per sec 16 you cannot take ITC as it is not in furtherence of bussiness.

Tushar sir,

As your company is saying to raise invoice it means you should get registered first.

Second thing if you get registered then automatically you can show expenses in your books and you can raise invoice to your company but there will be issue for availment of credit