Service Tax on reimbursement of expenses?

should we charge service tax on gross amount of bill (inclusive reimbursement of expenses) or should we charge on net amount of bill (excluding reimbursement of expenses only in case of pure agents else it shall be included

but as per finance act 2006, valuation of service tax includes all reimburesement of expenses.please check the attached file. and give your answer with applicable rule or any case refernce.
 

Rule 5(1) of Service Tax (Determination of Values) Rules, 2006 states that all expenses incurred during provision of service be considered as part of taxable service and shall be included for the purpose of charging service tax.

However Rule 5(2) provides certain exclusions to the above if certain conditions (totally 8) are fulfiled.  To explain the above exclusions I will provide 2 simple examples.

Example 1 : If a consulting engineer incurs expenses on travel, telephones etc to provide service and his total service cost is Rs.10,000 plus his reimbursement towards travel & telephones are Rs.1,000.  Then taxable service will be Rs.11,000 (even though he bills seperately for Rs.10,000 and Rs.1,000).  The amount incurred towards travel & telephone are incidental to provision of consuting engineer servcies and should be grossed up for purpose of service tax.

Example 2 : A Forward and clearing agent, on behalf of his client pays Delivery Order Charges to a shipping agent Rs.2,500 & pays CFS Charges of Rs.1,500 and and shows them seperately in the invoice.  He also bills Rs.3,000 towards his service charge.  In this case taxable service is Rs.3,000 as the other amounts totallying to Rs.4,000 are incurred on behalf and under authorisation of the service recipient and the service receipient has the primary responsibility to pay this amount but for sake of convenience the payments are made by the Forwarding and Clearing Agent.

Hope I was of some help on this query.

Regards

S Saravanan

https://ssaravanan-vvu.blogspot.com/