out of expenses spent

You are here :Home>Discussion>out of expenses spent
out of expenses spent 2017-07-01T18:45:25+00:00
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • Hanumanthasetty Vishwanathasettyhanumanthasetty vishwanathasetty
    Participant
    Post count: 1
    Topics: 1
    Replies: 0
    Been thanked: 0 times
    #2363 |

    for executing a service, some amount are spent and will be recovered on actuals from the service receiver, no tax was leviable on such amounts as per service tax rules herebefore. What about under GST.tax on out of pocket expenses.

    Ramasamy UlaganathanRamasamy Ulaganathan
    Participant
    Post count: 17
    Topics: 0
    Replies: 17
    Been thanked: 4 times

    Just want to clarify that as per the Service tax valuation rule 5 (1) any expenditure / cost incurred by the service provider in the course of providing taxable service, all such expenditure / cost shall be treated as consideration for taxable service and needs to be added for arriving taxable value to calculated Service tax.

    Though, there was Delhi HC ruling against the above valuation rule, Department filed SLP in Supreme court and case is still pending before SC. Until SC give it final ruling on this matter. ST on out of pocket expenses will be highly litigateable if tax not collected.

    There is no changes in valuation rule in GST regime. Hence, it is advisable to collect GST on the reimbursement portion if it is incurred during the course of providing taxable service.

    VENKAT VENKATARAGHAVANVENKAT VENKATARAGHAVAN
    Participant
    Post count: 5
    Topics: 1
    Replies: 4
    Been thanked: 0 times

    As opposed to Service Tax Rules, GST Rules are more clear enabling an aggressive stand and not charging GST on reimbursements. Everything centers around how the agreement between the service provider and service recipient is framed. Clearly, any payment by the service provider to a third party which otherwise would have been discharged by the recipient of service to the third party need not suffer GST provided such duty is established in the agreement and the service provider renders additional service to the recipient. As per rule 7 of Draft Determination of Value of Supply Rules the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the 8 conditions stated therein are satisfied.
    Pure agent means a person who:-
    a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both.
    b) Neither intends to hold nor holds any title to the goods or services or both so procured or provided as pure agent of the recipient of supply
    c) Does not use for his own interest such goods or services so procured and
    d) Receives only the actual amount incurred to procure such goods or services.
    It is strongly suggested that we have a re-look at all contracts and amend them as required.

    Ramasamy UlaganathanRamasamy Ulaganathan
    Participant
    Post count: 17
    Topics: 0
    Replies: 17
    Been thanked: 4 times

    Venkat,

    I agree with your view on Tax applicability on Pure Agent case but the given case is not a pure agnt. Here expenses incurred by Service provider during the course of providing service. GST being a indirect tax, i belive no point in taking aggressive stand by supplier to collect GST on the reimbursment of such expenses to avoid any litigation. Person who receive reimbursement invoice also entitle to take Input credit all most in all scaneria expect the case where receiver is unregistered or that service used for other than furtherance of business purpose .

    VENKAT VENKATARAGHAVANVENKAT VENKATARAGHAVAN
    Participant
    Post count: 5
    Topics: 1
    Replies: 4
    Been thanked: 0 times

    Ram, probably my view was influenced by a particular example i had imagined. A service recipient engages a service provider for retainer services. One of the service deliverable in the agreement is :Post advertisements in social media and recharge the expenses. The service recipient has an account with the social media (or may be created by the service provider for that purpose under the receiver’s name. The service provider back charges the ad cost to the receiver or may adjust the advance received from the receiver. In this case, is it not a pure agent’s activity?

Viewing 5 posts - 1 through 5 (of 5 total)

You must be logged in to reply to this topic.