Service tax on reimbursement

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 May 2015 Sir,

I have the following query:

Assesse is a subsidiary of a company. It incurs Rs. 100/- on behalf of holding co and bills the same to holding co for Rs. 110/-.(Rs. 10 being its administration charge)

Now my question is that on what amount service tax is to be charged?

Also note that incurring expense on behalf of holding co is not the recurring transaction for subsidiary.
Thanks In Advance.

Shreyas Sangoi

Shreyas Sangoi (Expert)
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29 May 2015 If the billing is Rs 110, then Service tax needs to be charged on entire Rs. 110.

The only way to minimise Service tax impact is to bill Rs. 10 separately (and charge ST on Rs. 10). Service Tax would not be applicable on Rs. 100, if conditions of "pure agent" as enumerated in Rule 5(2) of Service tax (Determination of value) Rules, 2006 are fulfilled.