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reimbursement of expenses

CA.VATSAL SHAH (SERVICE) (202 Points)

20 March 2008

One of service provider of Newspaper Readership Survey charged two bills. in one bill he charged his fees +service tax and in another bill he claim from us expenditure incurred by him +servicr tax.

So in case of second bill it is purely case of expenses reimbursement.

So it is fair to charge service tax on expenses claim for reimbursement?

pls clarify and drop an email on

cavickyshah @ gmail.com

Thanks

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6 Replies

OFFICESELVA (Service) (515 Points)
Replied 20 March 2008

He is correct. Reibursable expenditure should also be included in taxable value and tax paid with effect from 18/04/2006 onwards.

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CA.VATSAL SHAH (SERVICE) (202 Points)
Replied 20 March 2008

may be. but he gives separate bill for remibursement

he did not include this amt in chargeble fees

CA.VATSAL SHAH (SERVICE) (202 Points)
Replied 20 March 2008

may be. but he gives separate bill for remibursement

he did not include this amt in chargeble fees

OFFICESELVA (Service) (515 Points)
Replied 21 March 2008

Since in the second bill also he is charging service tax he is duty bound/legally bound to deposit any amount received as service tax with the Governemt.

Dilip Darji (392 Points)
Replied 21 March 2008

please let us know the catagory in which he obtained registration.

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Adv. S Sharma (Lawyer) (574 Points)
Replied 21 March 2008

hi in this case if service povider is providing service as a pure agent then Service Tax will not be applicable otherwise yes. Sub-Rule 2 of Rule 5 states that, when the expenditure incurred by the Service Provider as a “pure agent” than it will not be includable in the gross amount charged by the Service Provider from Service Recipient. But for this, some conditions should be satisfied by the Service Provider, which are as follows:- a) Service Provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured b) The recipient of service receives or uses the goods or services so procured by the Service Provider in his capacity as pure agent of the recipient of service c) The recipient of service is liable to make payment to the third party d) The recipient of service authorizes the Service Provider to make payment on this behalf e) 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 f) 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 g) Service Provider recovers from the recipient of service only such amount as has been paid by him to the third party and the goods or services procured by the Service Provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account. For the purpose of this, it is necessary to understand the meaning of “Pure Agent”. Explanation 1 to the rule 5 provides that for the purpose of rule 5(2), ‘pure agent’ means a person who— a. enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service b. neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service c. does not use such goods or services so procured and d. receives only the actual amount incurred to procure such goods or services. If he charges something extra, only that extra amount should be taxable and not entire amount, since that extra amount is for his services. thx