Service tax on travelling expenses

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 August 2011 Dear Sir

is service tax is leviable on travelling expenses incurred on carrying out audit of banks( statutory audit of banks) as well as carrying out audits in general.( reimbursement of travelling expenses.)

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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17 August 2011 Rereimbursement of expenses will not attract service tax

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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18 August 2011 As per Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, the cost or expenditure which is incurred by the service provider in the course of providing taxable service is to be included in the value of taxable services.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 August 2011 yes. agreed With Mr. Chackrapani sir, the rule 5(1) Service tax (Determination of value) the reimbursement of expenses will be part of the taxable service. accordingly my first reply will be corrected. sorry for first reply. the above said rule I provided below for your reference

5. Inclusion in or exclusion from value of certain expenditure or costs.–

(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.

(2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:-

(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;

(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;

(iii) the recipient of service is liable to make payment to the third party;

(iv) the recipient of service authorises the service provider to make payment on his behalf;

(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;

(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;

(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and

(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.

Explanation1.–For the purposes of sub- rule (2), “pure agent” means a person who–

(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service;

(b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;

(c) does not use such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services.

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