Service tax on reimbursement of exam fees.
This query is : Resolved
15 July 2014
Hi, my Co. is a private Ltd. co.
It incurs expenses on exam fees of certain certification courses of employees. It pays exam to instutions or reimburse the exam fees to employee.
My query is whether service tax is payable mt co. under reverse chsrge mechanism?
It incurs expenses on exam fees of certain certification courses of employees. It pays exam to instutions or reimburse the exam fees to employee.
My query is whether service tax is payable mt co. under reverse chsrge mechanism?
15 July 2014
Reverse charge mechanism not applicable in case if exam fees.
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15 July 2014
..............................................................................................
24 July 2025
Got it! Here’s the rundown on **service tax on reimbursement of exam fees** under reverse charge mechanism (RCM):
---
### Scenario:
* Your company (private Ltd) **pays or reimburses exam fees** to institutions or employees for certification courses.
* You want to know if **service tax applies under RCM** on this reimbursement.
---
### Key points:
1. **Is payment of exam fees a "service"?**
* Payment to educational or certification institutions for conducting exams or courses is a **service**.
* Typically, **service tax is applicable on educational services or related services** depending on the nature of the institution and service.
2. **Who is liable to pay service tax?**
* Normally, the **service provider (institution)** charges and pays service tax.
* However, if the service provider is located outside India or is an unregistered person, **reverse charge** may apply to the recipient (your company).
3. **Is reverse charge applicable here?**
* If the institution is **registered under service tax and charges tax**, then your company is **not liable under RCM**.
* If institution is **unregistered or located outside India**, your company must pay service tax under RCM on the exam fees paid/reimbursed.
4. **On reimbursement to employee:**
* If your company reimburses exam fees paid by employees (i.e., employee pays institution directly), service tax liability on your company arises only if you are treated as the service recipient under the service tax law.
* Generally, the actual service recipient is the employee; hence, your company **may not be liable under RCM** for reimbursed amounts.
---
### Summary Table:
| Payment To | Service Tax Liability | RCM Applicability |
| ------------------------- | -------------------------------------- | ----------------------- |
| Registered Institution | Institution charges & pays service tax | No RCM for your company |
| Unregistered Institution | Your company pays tax under RCM | Yes, applicable |
| Foreign Institution | Your company pays tax under RCM | Yes, applicable |
| Reimbursement to Employee | Usually no service tax on your company | No RCM generally |
---
### Final Notes:
* Check if institution is registered under service tax.
* If unregistered or foreign, your company must pay service tax under RCM.
* Reimbursements to employees typically do not attract RCM on your company.
---
Would you like me to help you draft a formal advisory note on this?
---
### Scenario:
* Your company (private Ltd) **pays or reimburses exam fees** to institutions or employees for certification courses.
* You want to know if **service tax applies under RCM** on this reimbursement.
---
### Key points:
1. **Is payment of exam fees a "service"?**
* Payment to educational or certification institutions for conducting exams or courses is a **service**.
* Typically, **service tax is applicable on educational services or related services** depending on the nature of the institution and service.
2. **Who is liable to pay service tax?**
* Normally, the **service provider (institution)** charges and pays service tax.
* However, if the service provider is located outside India or is an unregistered person, **reverse charge** may apply to the recipient (your company).
3. **Is reverse charge applicable here?**
* If the institution is **registered under service tax and charges tax**, then your company is **not liable under RCM**.
* If institution is **unregistered or located outside India**, your company must pay service tax under RCM on the exam fees paid/reimbursed.
4. **On reimbursement to employee:**
* If your company reimburses exam fees paid by employees (i.e., employee pays institution directly), service tax liability on your company arises only if you are treated as the service recipient under the service tax law.
* Generally, the actual service recipient is the employee; hence, your company **may not be liable under RCM** for reimbursed amounts.
---
### Summary Table:
| Payment To | Service Tax Liability | RCM Applicability |
| ------------------------- | -------------------------------------- | ----------------------- |
| Registered Institution | Institution charges & pays service tax | No RCM for your company |
| Unregistered Institution | Your company pays tax under RCM | Yes, applicable |
| Foreign Institution | Your company pays tax under RCM | Yes, applicable |
| Reimbursement to Employee | Usually no service tax on your company | No RCM generally |
---
### Final Notes:
* Check if institution is registered under service tax.
* If unregistered or foreign, your company must pay service tax under RCM.
* Reimbursements to employees typically do not attract RCM on your company.
---
Would you like me to help you draft a formal advisory note on this?
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