Service tax on reimbursement of expenses
This query is : Resolved
Aamir Ahmed Feetwala
(Querist)
16 May 2013
Dear Sir, Can we charge Service tax on claiming the reimbursement of Expenses. As per the Agreement with the client we can claim the reimbursement. Is there notification / circular for Service Tax on reimbursement of Expenses like Travelling, Lodging & Boarding, etc ??
Please Advise ??
Please Advise ??
Ganeshbabu K
(Expert)
16 May 2013
AS PER SERVICETAX VALUATION RULE 5(1)
Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.
AS PER THIS ANY SUM RECEIVED FROM SERVICERECEIVER BY SERVICEPROVIDER IS LIABLE TO SERVICE TAX
But delhi high court divisional bench recent judgement in the case of
Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India and Anr., W.P. (C) 6730/2008T
it is held that
Rule 5(1), Service Tax (Determination of Value) Rules, 2006 - Ultra Vires Section 66 and 67 of the Finance Act, 1994
Hon'ble Court while deciding the petition by the petitioner held the following:
1)Rule 5 (1) of the Rules is ultra vires section 66 and section 67 of the Finance Act, 1994 since it travels beyond the scope of the aforesaid sections.
2)The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as part of the gross amount charged by the service provider for the services provided.
3)The reimbursement of expenses for air travel tickets, train, hotel, etc. may also lead to double taxation.
Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.
AS PER THIS ANY SUM RECEIVED FROM SERVICERECEIVER BY SERVICEPROVIDER IS LIABLE TO SERVICE TAX
But delhi high court divisional bench recent judgement in the case of
Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India and Anr., W.P. (C) 6730/2008T
it is held that
Rule 5(1), Service Tax (Determination of Value) Rules, 2006 - Ultra Vires Section 66 and 67 of the Finance Act, 1994
Hon'ble Court while deciding the petition by the petitioner held the following:
1)Rule 5 (1) of the Rules is ultra vires section 66 and section 67 of the Finance Act, 1994 since it travels beyond the scope of the aforesaid sections.
2)The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as part of the gross amount charged by the service provider for the services provided.
3)The reimbursement of expenses for air travel tickets, train, hotel, etc. may also lead to double taxation.
Ganeshbabu K
(Expert)
16 May 2013
conclusion,
With Rule 5(1) of the Rules, being struck down the service providers may choose not to charge service tax on amount reimbursed for expenses incurred by them on hotel stay, travelling, documentation, etc.
With Rule 5(1) of the Rules, being struck down the service providers may choose not to charge service tax on amount reimbursed for expenses incurred by them on hotel stay, travelling, documentation, etc.
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