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Reimbursement of Expense

Service Tax (Legacy) 532 views 1 replies

Hello friends,

Please Clear the concept of  "Reimbursement of expense or Out of Packet Expenses & reimbursement of exp. Incurred on behalf of service receiver with example in service tax.

How can we treat this?

 

Replies (1)

ur question is not clear as to what is it that u want to know abot reimbursement of expenses. Though i wud try to give u a brief about the same.

Service tax is levied on the gross amount charged fron the customers. So there are no deductions allowed for the expenses that u incur in providing the services. In short , service tax is on ur turnover and not on the profit as is the case wit ur income tax.

Now an issue arose in cases like customs house agent (service provider) who acts as an agent of his customer while incuring certain expenses (eg: warehouse rent, unloaing charges etc.) . So when he billed the client he would bill the service charges for the service he rendered and also bill for recovering the expenses that he incurred on behalf of the client.

In such case it would be apt to charge service tax  only on the service charges that is recovered and not on the exp incurred on behalf of the client.

SO rules were drafted for pure agents to ensure that only in cases where the conditions mentioned therein were fulfilled the exp will not form part of the taxable value of services


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