Service tax on reimbursement of exp and cenvat credit

This query is : Resolved

CA Ritu Chauhan (Querist)
Follow

28 June 2013 Please guide me...
A, a service provider, raises an invoice of Rs. 5 lacs for providing a taxable service, out of which Rs. 4 lacs is towards procurement of consultation charges(which is payable to B). A charges service tax only on Rs. 1 lac. B has also charged service tax on his invoice of Rs. 4 lacs, A wants to take credit of tax charged on Rs. 4 lacs by B.

Please guide me whether the above transaction is as per the provisions of service tax law.

sivadas chettoor

sivadas chettoor (Expert)
Follow

29 June 2013 I feel that the concept of pure agent is difficult to apply. Please note that all the conditions laid down in R.5 of determination of value rules has to be met.One condition is that the service receiver should be liable to pay the third party service provider. other conditions like authorization by the service receiver etc may not be satisfied. If possible ask B to raise the invoice directly to the party and the payment can be routed thro A.
Please note that my answer is confined to the application of the concept of PURE AGENT only and has not considered whether reimbursement can be regarded as CONSIDERATION as per the definition clause itself.

siva208@yahoo.com

Ganeshbabu K

Ganeshbabu K (Expert)
Follow

29 June 2013 Yes..if A is taking credit on that 4 lakhs means you cannot say that you are pure agent..in that case you need to charge service tax on total 5 lakhs..and not one lakh..

if you charge service tax on only one lakh..you cannot take credit for 4 lakhs..B is entitled take such credit..if you have taken credit on 4 lakhs paid by you..concept of pure agent fails...

and you need to charge service tax on total 5 lakhs in that case..

Message likes : 1 times

CA Ritu Chauhan

CA Ritu Chauhan (Querist)
Follow

30 June 2013 thank u sir.... u both have solved my doubt thank u so much

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now