Service Tax on reimbursement of expenses?

3288 views 4 replies

How can we charge service tax if a bill includes reimburesement of expnses? 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?

Please answer

Replies (4)

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.
 

Originally posted by : skandar
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

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/

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 24 June 2026
CA Article Trainee

Rahul Dang & Associates

Pune

CA Inter

View Details
Company
24 June 2026
Chartered Accountant

CA Darshita Shah & Co

Nadiad

CA

View Details
Company
25 June 2026
AUDIT MANAGER

JDAS & ASSOCIATES

New Delhi

CA

View Details
Company
19 June 2026
Accounts Executive

Getfive Advisors Pvt. Ltd.

Ahmedabad

CA Inter

View Details
Company
ARTICLESHIP 04 June 2026
Article

Rakhecha & Co.

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 08 June 2026
Internal & Taxation Article

O P Bagla & Co LLP

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 24 June 2026
ARTICLE ASSISTANT

BHUPINDER SHAH AND COMPANY

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 09 June 2026
Article Trainee

Numbertree LLP

Mumbai

CA Inter

View Details