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Reimbursement of Gross Salary liable to Service Tax

VIBHA GUPTA (student) (31 Points)

31 January 2011

Whether Service Tax is applicable on the reimbursement of Gross Salary to Contractor?

Case: A company contract with the private company for providing labour to Company.

And Contractor charged a bill from company in following format.

Service Charge Rs 100

Reimbursement of Gross Salary Rs 1000

Reimbursement of PF & ESI Rs 150

Total Rs 1250

Add: Service Tax @ 10.30% Rs 128.75

Total bill amount Rs 1378.75

Please reply ASAP.

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7 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 31 January 2011

Yes service tax will applicable on the reimbursement of expenses.

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Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 31 January 2011

The valuation rules provide for adding the expenses incurred.

However in this case the contractor is responsible for payment of salaries to the employees and also responsible for payment of statutary dues and not the company which asks him to provide the persons. Therefore the salary is not a reimbursement in my view even if noemnclated as such.

avinash (CA, CS) (54 Points)
Replied 31 January 2011

As per service tax rules, for reimbrushment of salary to contractory including his service charges, service tax is applicable on salary + service charges both.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 31 January 2011

69. MANPOWER RECRUITMENT OR SUPPLY AGENCY’S SERVICES

(A) Date of Introduction: w.e.f. 07.07.1997 (Notification No.23/97-S.T dated 02.07.1997)

(B) Definition and scope of service:

“Taxable Service” means any service provided or to be provided to any person, by a manpower

recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or

otherwise, in any manner;

[‘Explanation.—For the removal of doubts, it is hereby declared that for the

purposes of this sub-clause, recruitment or supply of manpower includes services in relation to

pre-recruitment screening, verification of the credentials and antecedents of the candidate and

authenticity of documents submitted by the candidate]*

[Section 65 (105) (k) of Finance Act, 1994 as amended]

“Manpower Recruitment or Supply Agency” means any person engaged in providing any

service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or

otherwise, [to any other person];]

[Section 65(68) of Finance Act, 1994 as amended]

Rate of Tax Accounting Code

Service Tax 10% of the value of services 00440060

Education Cess 2% of the service tax payable 00440298

Secondary and

Higher Education

cess

1% of the service tax

payable.

00440426

Other –

Penalty/interest

As levied or applicable 00440061

( Rate of tax is effective from 24.02.2009.)

(Guest)

Originally posted by : avinash
	As per service tax rules, for reimbrushment of salary to contractory including his service charges, service tax is applicable on salary + service charges both.