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Service tax on reimbursement

shrikant (Accounts Manager) (44 Points)

24 June 2016

We, the Pvt Ltd company (supplier of decorative, indoor, outdoor light fittings) taken Farm House on lease for display of Goods and other business activities. We also sub-lease the same Farm House to Third Party and reimburse the expenses from Third party in following manner: 1) Lease Rent : 50% 2) Electricity Bill : 50% 3) Telephone & Internet : 50% 4) Security Charges : 50% 5) Common Staff Salary : 50% Now please advise us, whether Service Tax is applicable on above reimbursement?

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3 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 24 June 2016

As per the definition, consideration inter alia includes reimbursement. Hence ST is applicable on reimbursement too.

shrikant (Accounts Manager) (44 Points)
Replied 24 June 2016

Thanks to reply. Is it applicable on reim of 50% electricity and Telephone Exp? Whether this exp covered under Pure Agent? Please reply

CMA Poornima Madhava (CMA) (13097 Points)
Replied 24 June 2016

If such expenses are incurred in the capacity of pure agent (meaning given below), then ST is not applicable on such reimbursements. But this doesn't seem to be pure agent services and hence I think ST is applicable.

Pure agent: A person who

enters into a contractual agreement with SR to act as his pure agent to incur expenditure/costs in the course of providing taxable services
neither intends to hold nor holds any title to goods/services so procured/provided
does not use such goods/services so procured
receives only the actual amount incurred to procure such goods/services