Service tax on reimbursement for salary paid

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Gopal G (Querist)
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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.

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, as the case it would be, but mention case laws if it is available

CA.Hanumantha Reddy

CA.Hanumantha Reddy (Expert)
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18 January 2011 in my view this would not liable to service tax as it is purely reimbursement of salary cost. Since, the salary is supposed to be paid by Vendor but on account of non availablity of vendor staff the same has been paid by the X. But let me know how staff is appointed wthether it is on X role or Vendor role.

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