Service tax on reimbursement of electricity charges

Queries 3578 views 5 replies

Ganesh

Finance

24 Points Joined July 2013

I need an advice on the following.

If any company want to hire services to receive goods, warehouse goods, bill the goods as per instructions and pay the service provider some fixed percentage as per the turnover. The company intents to entered an agreement with the said agency for the same. One of the clause of the agreement would be that company will reimburse them the actual electricity charges for the said warehouse. Ther service provider do not own the warehouse. They may take a warehouse on rent from say "X" The electricity bill will be in the name of X which will be paid by the service provider. Now in this scenerio, I would like to know

1. Whether Service Tax is applicable on this type of reimbursement of electricity

2. Can the company pay the electricity bill directly so that the above question do not arise. Please note that original lease agreement will be between service provider and "X" and the electric meter is in the name of "X"

3. Can we use the judgement given by Delhi High Court in similar case

Thanks in advice of your views

Replies (5)

Prabhat Kumar

Advocate & Consultant

1912 Points Joined July 2009

Rule 5 of the Service Tax(Determination of Value) Rules,2006 has been declared unconstitutional by the Delhi High Court,so as on today there is no Service Tax on reimbersement.

Srinivas Reddy

Professional

2 Points Joined August 2016

Sir, If any margin is added on electricti bills while collecting from the tenannt.

CA Dheeraj S

Practicing CA

427 Points Joined May 2010

No ST on reimbursements of electrcity charges if paid the expenses have been incurred as pure agent i.e with sole reason of benefiting the other party.

If reimbursements involve an amount over and above the actual Electricity Charges, entire amont(Elec Charges + Additions) will be liabile to Service Tax

Srinivas Reddy

Professional

2 Points Joined August 2016

Sir,

Ours is a SEZ unit, we are providing DG power to our clients.We have not obtained form A2 for ST Exemption.Is it liable for Service Tax.

Dayal

Gen. Manager - Indirect Taxation

3451 Points Joined October 2007

The following is clarified under one of the citations

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH, BANGALORE

GMR HYDERABAD INTERNATIONAL AIRPORT LTD
Vs
COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, HYDERABADIV

"After carefully considering the submissions, we, at the prima facie stage, are of the view that the charges, which the appellant received from the tenants, on account of the actual consumption of electricity and water and which are further deposited by them to the respective departments, cannot be considered to be the value of the services being provided by them. At the most the commission which they received for doing the said service would be the value of the services"

Therefor only the mark up would be subject to service tax and not the actual electricity charges