Service tax on reimbursement for salary paid


Querist : Anonymous (Querist) 15 January 2011

While working with client, I came a across one practical situation of service tax liability on reimbursement. Please suggest a correct answer to decide in below situation.


X a company engaged in retailing business. X purchases apparels of different brands from several vendors for selling it out in its store. For that, X have an agreement with all vendors to retain the margin on selling amount to be paid to them (It seems like consignment sales, but it is a regular purchases and not on consignment). As per the agreement all vendors should send their own staff to sell their product in counter. If in case, vendor fails to give staff to sell the product in counter, X should depute its own staff and vendor should reimburse the cost of this staff. X deputed few staffs and charging to vendor for the cost of these staff (only the amount paid to staff). Should X liable to collect and pay the service tax on this? If X is not a specific service provider in man power recruitment and supply, is it makes any difference (X has not registered for this services)?

Please any one give me correct answar, either case it will be,but with case law if it avilable.

Thanks & Regards,
Gopal Gaonkar

15 January 2011

Threshold limit for service tax registration is Rs.10 Lac, If Mr X is not sepecific service provider in man power recruitment and his services value regarding for such is not exceed Rs.10 Lac, then he need not require to charge service tax on it.

Querist : Anonymous (Querist) 15 January 2011

Thank You. If x is already having service tax registration, but not for man power recruitment/ outsoursing.In such a case, what is the tax effect? ( Salary reimbursement will not be exceeding Rs.40,000 in a month) can you please reply this?

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