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Service tax on reimbursement of expenses

AJAY PRATAP (FINANCIAL CONSULTANT) (72 Points)

02 February 2012

Dear All,

We have to send invoice to our overseas partner for reimbursement of expenses incurred in India. So, please let me know whether service tax charged on reimbursement invoice or not?

Second thing, for the same invoice we had spent Rs. 5,51,500/- including service tax of Rs. 51,500/- in India for our overseas partner. And as per me Rs. 51,500/- which we paid to vendor in India to be shown as Service Tax Receivable(Assets) in our Balance Sheet. So, please also let me know, can i take the refund of Rs. 51,500/- from Service Tax Department or not.

Please confirm.........

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8 Replies

Dilip Darji (392 Points)
Replied 02 February 2012

Dear Sir.

For this purpose you need to inform us the cataogy of service provided by you.You can also refer Export of Services Rules, 2005 and get yoursdelf satisfied. However, in case of any doubt, you may refer to forum.

Regarding availment of CENVAT Credit on the input Services used by you, during providing output services, it is o clarify that as long as you are paying service tax on out put services, you would be entitled to avail CENVAT Credit. But cash refund is not possible.

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AJAY PRATAP (FINANCIAL CONSULTANT) (72 Points)
Replied 02 February 2012

Dear Mr. Dilip,

Thanks for your reply. We are providing Business Auxillary services.

Dilip Darji (392 Points)
Replied 02 February 2012

Dear Sir.

If the Services are provided outside India and the payment thereof has been received in convertible foreign exchange, you need not to pay Service Taqx on the services provided by you to foreign customer. If services are provided out of India, it is quite obvious that the reimbursement being claimed by you are also towards services provided outside India and you need not to pay any Services tax on your Invoices towards reimbursement of such expenses, subject to receipt of payment in foreign currency. You can very well raise your invoices for the total expenses incurreed by you, including Service Tax paid to your vendor.

Regarding refund of Service Tax paid by you, on input services, you are entitled to claim rebate of services Tax on input services.

Since you are not paying Service Tax on your output services, you are nopt entitle to avail CENVAT credit of Service Tax paid by you on input services.

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AJAY PRATAP (FINANCIAL CONSULTANT) (72 Points)
Replied 02 February 2012

Dear Mr. Dilip,

We had provided services to our overseas partner inside India. Mainly we had organised an exhibition for them. And we had paid the vendor Rs. 551500 including service tax. As services provided in India to foreign client, so it was liable for service tax, but my main query is regarding, as we paid to the vendor in India on behalf of foreign partner and just want to raise the invoice for amount spent to foreign partner. So, i just want to know whether we are liable to pay service tax on reimbursement invoice to foreign partner or not.

We are also providing services to them in India like engineering and on those service invoices we are also paying service tax as services provided inside India to foreign client. So, we are also service provider to them. And at the time of paying service tax we also taking cenvat credit of RS. 51500 as mentioned above, but after adjusting the same we still have the balance cenvat credit of Rs.38000. So, now how we have to adjust the balance cenvat credit?

Dilip Darji (392 Points)
Replied 03 February 2012

Mr.Ajay.

As long as services are provided within India, you are liable to pay Service Tax in India on the gross value, including reimursement. Commercially you may recovered reimursement expenses alongwith Services Tax from the foreign buyer, by charging consolidated price and you can claim CENVAT credit of input services availed by you for providing taxable output services.

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AJAY PRATAP (FINANCIAL CONSULTANT) (72 Points)
Replied 03 February 2012

Dear Mr. Dilip,

Are you sure that we have to pay service tax on reimbursement of expenses? And one more thing, commercialy if we raise the invoice to our foreign partner only for expenses for Rs. 500000/- without service tax amount what we are paying to vendor in India, then what we can do? Please let me know, In this condition also we have to pay service tax or not.

Dilip Darji (392 Points)
Replied 03 February 2012

Mr.Ajay.

Your Invoice to your foreign buyer is a supplementorty invoice. If you have paid Service Tax on original Invoices (because Services is liable to Service Tax) and Service Tax is payable on gross amount charged, you are required to pay Service Tax on reimbursement Charges. If you have not prepared seperate invoice for reimbursement charges and included in original invoice, you would have certainly paid Service Tax on reimbursement charges.

If you are raising Invoice for Rs.500000/- on your foreign buyer, you are required to do back working and pay Service Tax and mention in the invoice that the total value Rs.5,00,000/- is inclusive of Service Tax @ 10.3 %. But you can very well raise invoice for Rs.5,51,500/- charging Rs.51,500/- seperately towards Service Tax and pay to the Govt.

Since you have paid Service Tax on your out put services, you can very well avail CENVAT Credit of Rs.51500/- being Service Tax paid by you on your input services.

satyam saxena (Finance officer) (21 Points)
Replied 26 July 2012

Hello ,

I hope u are doing well.

We are providing Business Auxillary services. now we have to raise reimbursement invoice on one of our foreign client in california. so service tax 12.36% should also be additional or not.

Please help me in this.

Thanks

Satyam