Service tax on out of pocket expenses

How "for out of pocket expenses only"? for what?

There must be some service provided to your client as only reimbursement of out of pocket can not be possible. In case of any service provided to your clients, in terms of Rule 5(1) of Service Tax(Determination of Value) Rules, 2006, any such out of pocket amount spent and recovered from service receiver, the same become part of gross assessable value for service and taxable.

 

concept of pure agent may attract, read rule 5 of Service tax (determination of value) rule

Waht is concept of pure agent? While providing service if Service Provide pay amount for any thing or service, for which he is not supposed to pay and service receiver has to pay, but for convenience, if he pay and later on recover the exact amount from service receiver, the said amount can be recovered as Pure Agent. For Example CHA is agent of Exporter for particular work of clearing document from Customs. However he pays bills raised by Port/CFS which are in the name of Exporters and recovers exact the same amount from Exporter. CHA is not using service of Port/CFS but for convenience only he help Exporter. In that circumstance, the amount is called recovered as Pure Agent. Such amount never affact valuation of service provided.

I respect views of CMA Ravindersingh and Ms Renu Singh to some extent that if it does not affact valuation of service. It is depends on circumstances and varied case to case. Main aspect is what is total cost, directly or indirectly, to be paid by service receiver to service provider in relation to service provided and used by service provider. 

So there are two part in Valuation Rule 5(1) includible expense and 5(2) Excludible(Pure Agent). The same Rules is still in existance and required to be followed to avoid litigation/penal provision.