Service tax on reimbrusement

This query is : Resolved

Sumit (Querist)
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09 April 2009 If a reimbursement of out of pocket expenses is made under a service contract, can service tax be charged on that. Please mentioned relevant law or notification

Om Prakash Singh

Om Prakash Singh (Expert)
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10 April 2009 Dear sumit reimbursement of out of pocket Exp is not under the service tax hence neither service tax sud be charged.nor tds is deducted through it.

Vanita Rathi

Vanita Rathi (Expert)
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10 April 2009 Reimbursement of out of pocket expenses is part of service and is part of taxable service. And hence service tax is chargeable.
However,Often, a service provider incurs some expenditure on behalf of service receiver and then recovers the amount from him. Such expenditure is not part of service provided by him to service receiver, but is incurred by him as per business practice or convenience.
Rule 5(2) provides that the expenditure or costs that a service provider incurs, as a pure agent of the client, shall be excluded from the value if such service provider fulfils prescribed conditions.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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10 April 2009 View of Vanita Rathi seems correct. For further details pl refer rule 5(2) in the following link https://www.servicetax.gov.in/value-rules.htm

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