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Expenses reimbursement

02 May 2018

Dear Esteemed members, Anyone pls clarify Whether GST should be charged on invoice raised for claiming reimbursement of expenses from clients.thk you.

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6 Replies

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 02 May 2018

Whether you are incurring those reimbursable expenditure as pure agent ?

For the purposes of this rule, the expression ―pure agen means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

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

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A‘s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

If you incur expenditure as pure agent then reimbursement value is not to be included in taxable amount, otherwise u must include.

sasidharan (Articles) (29 Points)
Replied 02 May 2018

Thank you Mr. Shivam. Whether existence of contract between the parties is pre-requisite to raise a pure agent service invoice ?, if yes, In the said contract, whether we have to mention all the nature of expenses exhaustively in the contract or by including the general wordings will do. Thank you.

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 02 May 2018

Yes contractual agreement is pre-requisite. Practically speaking,agreement can be written or oral. This reimbursement should be mentioned separately in invoice