St and tds on cha
This query is : Resolved
13 March 2016
Query!!
Can cenvat be availed on expenses reimbursed to CLEARING AND FORWARDING AGENT(CHA)???
Even Some reimbursement bills are on the CHA's name.
And CHA has not charged ST on reimbursement as per amended by FINANCE ACT 2015.
Is TDS,applicable on CHA bill including reimbursement????
CHA is not deducting TDS saying that it is not his expense.
Client party argues that TDS is not on reimbursement as per s.4(2) of IT act.
Such arrangement will defeat entire TDS PROVISIONs!!!
13 March 2016
Regarding TDS Give e your mail id, i will forward article to u . Regarding CENVAT yes you can claim if Bill is in your name.
25 July 2025
Great question! Here’s a clear breakdown on **CENVAT credit, service tax, and TDS treatment on reimbursements to Clearing and Forwarding Agents (CHA):**
---
### 1. **Can CENVAT be availed on expenses reimbursed to CHA?**
* **Yes**, CENVAT credit can be claimed on service tax paid on **reimbursements to CHA**, provided the reimbursement is in the nature of **service** and service tax is charged on that reimbursement.
* However, **if the CHA does not charge service tax on the reimbursement (as per Finance Act 2015 amendments)** — for example, if reimbursement is a pure out-of-pocket expense and not a service — then **no service tax is paid** on that reimbursement and **no CENVAT credit can be claimed** on it.
* **Important:** The nature of reimbursement matters. If the reimbursement is a **pure pass-through expense**, no service tax and no CENVAT applies. If the CHA is providing a service and bills you with service tax included, then CENVAT credit is available.
---
### 2. **Is TDS applicable on CHA bill including reimbursement?**
* **TDS under Section 194C (Contractual payments)** applies to payments made for services or contracts.
* According to **Section 4(2) of the Income Tax Act**, TDS is not applicable on **pure reimbursements** (pass-through expenses), because the amount reimbursed is not income or consideration for services.
* So, on the **service charges portion** of CHA bills, **TDS is applicable** and should be deducted.
* On **pure reimbursement amounts**, TDS should **not be deducted**, as these are not payments for services.
* **If the CHA is not deducting TDS**, they may be correct regarding reimbursement portions, but for service charges, they must deduct TDS if applicable under the contract.
---
### 3. **Client’s argument that TDS is not on reimbursement and the risk**
* The client is **correct that TDS is not applicable on pure reimbursements**.
* But if the reimbursement is treated as part of the service charge or if the reimbursement is bundled with service and no bifurcation is done, the tax authorities may consider the entire amount as taxable and TDS may be applicable.
* Proper invoicing and clear segregation of service charges and reimbursements on the bill is critical.
* Otherwise, yes, **such arrangements may defeat the TDS provisions** and cause tax complications.
---
### **Summary:**
| Aspect | Treatment |
| ---------------------------- | ------------------------------------------------------------------------------------------ |
| CENVAT on reimbursement | Yes, if service tax charged on reimbursement; No if pure reimbursement without service tax |
| Service tax on reimbursement | Payable if reimbursement is a service; else no |
| TDS on CHA bill | TDS on service portion only, not on pure reimbursements |
| CHA deducting TDS | Should deduct on service charges, not on reimbursement |
---
If you want, I can help you draft a clear accounting/tax policy or invoice template for CHA bills that segregates reimbursements from service charges to avoid confusion. Would that help?
---
### 1. **Can CENVAT be availed on expenses reimbursed to CHA?**
* **Yes**, CENVAT credit can be claimed on service tax paid on **reimbursements to CHA**, provided the reimbursement is in the nature of **service** and service tax is charged on that reimbursement.
* However, **if the CHA does not charge service tax on the reimbursement (as per Finance Act 2015 amendments)** — for example, if reimbursement is a pure out-of-pocket expense and not a service — then **no service tax is paid** on that reimbursement and **no CENVAT credit can be claimed** on it.
* **Important:** The nature of reimbursement matters. If the reimbursement is a **pure pass-through expense**, no service tax and no CENVAT applies. If the CHA is providing a service and bills you with service tax included, then CENVAT credit is available.
---
### 2. **Is TDS applicable on CHA bill including reimbursement?**
* **TDS under Section 194C (Contractual payments)** applies to payments made for services or contracts.
* According to **Section 4(2) of the Income Tax Act**, TDS is not applicable on **pure reimbursements** (pass-through expenses), because the amount reimbursed is not income or consideration for services.
* So, on the **service charges portion** of CHA bills, **TDS is applicable** and should be deducted.
* On **pure reimbursement amounts**, TDS should **not be deducted**, as these are not payments for services.
* **If the CHA is not deducting TDS**, they may be correct regarding reimbursement portions, but for service charges, they must deduct TDS if applicable under the contract.
---
### 3. **Client’s argument that TDS is not on reimbursement and the risk**
* The client is **correct that TDS is not applicable on pure reimbursements**.
* But if the reimbursement is treated as part of the service charge or if the reimbursement is bundled with service and no bifurcation is done, the tax authorities may consider the entire amount as taxable and TDS may be applicable.
* Proper invoicing and clear segregation of service charges and reimbursements on the bill is critical.
* Otherwise, yes, **such arrangements may defeat the TDS provisions** and cause tax complications.
---
### **Summary:**
| Aspect | Treatment |
| ---------------------------- | ------------------------------------------------------------------------------------------ |
| CENVAT on reimbursement | Yes, if service tax charged on reimbursement; No if pure reimbursement without service tax |
| Service tax on reimbursement | Payable if reimbursement is a service; else no |
| TDS on CHA bill | TDS on service portion only, not on pure reimbursements |
| CHA deducting TDS | Should deduct on service charges, not on reimbursement |
---
If you want, I can help you draft a clear accounting/tax policy or invoice template for CHA bills that segregates reimbursements from service charges to avoid confusion. Would that help?
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