Service Tax on Out of Pocket Expenses

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Sachin Mohite (Querist)
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04 December 2010 Please inform, whether service tax is chargeable on At Actual Out of Pocket Expenses charged separately through different invoice.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 December 2010 Rule 5(1) provides that where certain expenditure or costs are incurred by the service provider in the course of providing any taxable service, all such expenditure or costs shall be treated as consideration for the taxable services provided or to be provided and shall be included in the ‘value’ for purpose of charging of service tax on the said service.
This is a general rule which makes it clear that, even when such expenditure or costs are recovered separately by service provider from service receiver, such expenditure or costs must be included in the value of taxable service.
However, expenditure incurred by service provider as ‘pure agent’ of service receiver is not includible, as per rule 5(2).

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