Service tax on reimbursement of travel and accommodation expenses.
This query is : Resolved
28 March 2017
Dear All,
Please help me to know whether to charge Service Tax on reimbursement of travel and accommodation expenses.
Awaiting all yours reply.
28 March 2017
No, Service tax should not be charged on reimbursement of expenses.
28 March 2017
But our CA saying to charge.
29 March 2017
Look, Service Tax is not charged on reimbursement expenses. And for that reimbursement of bus fare and reimbursement of expenses on behalf of client both are same. So as per ur CA a person getting reimbursement of bus/taxi or metro fare should also charge service tax in the debit voucher, is int it??
29 March 2017
I create 15 reimbursement invoices in a month in the name of many clients name.
29 March 2017
We provide training in many cities and for training we send invoice against travel and accommodation expenses.
29 March 2017
Please suggest Sir.
29 March 2017
http://taxmasala.in/service-tax-on-reimbursement-expenses/
24 July 2025
Great question! Here’s how **service tax on reimbursement of travel and accommodation expenses** generally works:
---
### When is Service Tax applicable on reimbursement of travel & accommodation expenses?
1. **If the reimbursement is a true "reimbursement"** of expenses incurred by you on behalf of the client (i.e., you paid actual travel/accommodation costs, and you just pass on the exact cost to the client without markup or profit), **service tax is generally NOT applicable on that reimbursement amount**.
2. **If you charge a markup or profit on those expenses**, then service tax is applicable on the **markup portion** as it is treated as a taxable service.
3. **If the reimbursement is a part of your contractual service**, and the payment is not just a pass-through but forms part of your gross receipts from the service, then service tax applies on the full amount including reimbursement.
---
### Key points to check:
* **Document the expenses well** — keep bills, payment proofs, and agreements showing these are actual costs reimbursed.
* **Separate the reimbursement clearly** in your invoices to clients.
* **If payment is under reverse charge mechanism (RCM),** check if that applies for your specific services.
---
### Summary:
| Situation | Service Tax on Reimbursement? |
| ------------------------------------------ | ----------------------------------- |
| Pure pass-through of actual expenses | No service tax on reimbursement |
| Reimbursement with markup/profit | Service tax on markup/profit amount |
| Part of overall contract price (not clear) | Service tax on total amount |
---
If you want, I can help draft an invoice format or provide specific legal references for your case. Would you like that?
---
### When is Service Tax applicable on reimbursement of travel & accommodation expenses?
1. **If the reimbursement is a true "reimbursement"** of expenses incurred by you on behalf of the client (i.e., you paid actual travel/accommodation costs, and you just pass on the exact cost to the client without markup or profit), **service tax is generally NOT applicable on that reimbursement amount**.
2. **If you charge a markup or profit on those expenses**, then service tax is applicable on the **markup portion** as it is treated as a taxable service.
3. **If the reimbursement is a part of your contractual service**, and the payment is not just a pass-through but forms part of your gross receipts from the service, then service tax applies on the full amount including reimbursement.
---
### Key points to check:
* **Document the expenses well** — keep bills, payment proofs, and agreements showing these are actual costs reimbursed.
* **Separate the reimbursement clearly** in your invoices to clients.
* **If payment is under reverse charge mechanism (RCM),** check if that applies for your specific services.
---
### Summary:
| Situation | Service Tax on Reimbursement? |
| ------------------------------------------ | ----------------------------------- |
| Pure pass-through of actual expenses | No service tax on reimbursement |
| Reimbursement with markup/profit | Service tax on markup/profit amount |
| Part of overall contract price (not clear) | Service tax on total amount |
---
If you want, I can help draft an invoice format or provide specific legal references for your case. Would you like that?
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