GST on Reimbursement of conveyance expenses

We are providing housekeeping services to one of the government establishments. (Referred to as a client here). The Client is telling us to raise the invoice without levying GST as reimbursement of expense for conveyance incurred by housekeeping employees. Kindly note the following points first:

All the employees are on our payroll.
The conveyance expenses incurred by employees was as per client direction and for their business purpose.
Neither ticket nor any kind of third-party document available.
The duly signed document by the client made available with the following column only
Sr no. | Name of Employee | Date | Amount |
No Management fees to be charged. Invoice of Rs.100 to be raised for Rs. 100 spent by employees.
We have to pay employees first then only we can raise an invoice.

Hence, our query is, can such expenses be categorized as reimbursement? Is non-charging of gst on raising invoice amounts to a violation of GST law?

Our personal opinion is GST has to be charged on this. your views are appreciated.

Hey Jitendra! Here’s a clear take on your query about GST on conveyance expense reimbursements:

Facts Recap:

You provide housekeeping services to a government client.
Client asks you to raise invoice without GST on conveyance expenses for employees.
Employees are on your payroll.
Conveyance expenses are incurred as per client’s directions for their business.
No third-party invoices (like taxi receipts) are available.
Client provides signed document with employee name, date, amount only.
You want to invoice exactly the amount paid (no margin).
You pay employees first, then raise invoice to client.

Key GST points on reimbursements:

1. When is reimbursement treated as ‘pure reimbursement’ (not a supply)?

Under GST law, for an amount to be treated as a pure reimbursement (no GST), these conditions generally should be met:

The expense must be incurred by the supplier on behalf of the recipient.
The supplier must act as an agent of the recipient.
The supplier must have a separate contract or agreement for such reimbursement.
The supplier does not make any profit or margin on the reimbursed amount.
The amount reimbursed is supported by proper tax invoices from third parties.
The reimbursed amount is clearly specified in the contract.

2. Does your situation qualify for ‘pure reimbursement’?

You incur expense on behalf of client (as per their direction).
But no third-party tax invoices are available for conveyance (no tickets, no receipts).
The only document is client’s signed statement mentioning amount.
Employees are on your payroll, so conveyance is your expense.
No margin added, amount invoiced matches expense.

3. Implication on GST

Since no proper tax invoice from third party (like taxi, transport vendor) is available, this is not pure reimbursement.
The amount paid to employees for conveyance is part of your business expense, and you are passing the cost to client.
Hence, this is considered as supply of service, and GST is applicable on the invoiced amount.
Non-charging GST on such invoices may be violation of GST law.

4. Recommended approach

Raise invoice including GST on the conveyance amount reimbursed.
Ensure your invoices clearly mention it as a reimbursement of conveyance expenses.
Maintain proper documentation (client instructions, signed expense sheets).
If possible, obtain third-party bills or travel tickets in future for smooth GST compliance.

Summary Table:

Aspect	Applicability
Pure reimbursement (no GST)	No (lack of third-party tax invoices)
GST on conveyance reimbursements	Yes, GST is applicable
Risk of non-charging GST	Possible violation and penalties

If your client insists on no GST, you may want to discuss the GST compliance risk with them, or check if they have some exemption or specific circular. Otherwise, it’s safer to comply with GST rules.

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CA Jitendra Adhyaru

Aashok Kumar Sharma