Goods and Services Tax or GST is made simple compared to earlier indirect tax laws. The confusion which we had earlier is very specifically articulated by government regarding reimbursements of expenses incurred at the time of provision of services.
Expenses incurred by service provider acting as a PURE AGENT shall be excluded from value of supply if some specified conditions are fulfilled.
It should be noted that you cannot exclude expenses incurred on behalf of recipient of service unless you satisfy the conditions specified.
Rule 7 of the valuation rules issued in public domain is the applicable rule to ascertain whether expenses incurred by service provider should be excluded or not.
I also suggest you to read valuation of supplies under section 15 of CGST Act, 2017.
The conditions which should be satisfied before excluding reimbursements are:
Explanation . - For the purposes of this rule, “pure agent” means a person who -
You must have doubts whether expenses listed below can be claimed as reimbursements and be excluded from value of supply.
The first condition is that supplier of service should act as a Pure Agent of his client/customer. If you are not providing services as a pure agent then you can not deduct expenses incurred on behalf of customer/client from value of supply of services.
You can deduct only those payments which were supposed to be made by your customer and parties involved in transaction knew the fact that it is your customer who is supposed to make payment.
Your customer should have authorised you to make payments on his behalf and you should:
Let us understand this rule with an example.
We will take an example of professional services provided by CA, CS or Lawyers. Professionals such as Chartered Accountants sometime have to make payment on behalf of their clients. Take an example, of a CA who provides service of LLP Registration.
CA charges client his professional fee along with expenses incurred in form of payment to ROC. In this case CA acts as a pure agent of his client.
If fee of providing services was Rs. 15,000 and ROC expenses incurred are Rs. 5,000.
CA need to charge tax only on Rs. 15,000 and not Rs. 5,000 which were paid in discharge of his duty as a Pure Agent.
Here things to be noted are that, the payments to ROC were made on behalf of service recipient and CA acted as a pure agent between his client and ROC. Service received from ROC by making payment were not used by CA but by his client to get the name approval and registration.
Whether re imbursement of food,travel bills etc fall within the ambit of pure agent expense?
We are man power supply organisation. Our client advises us for reimbursement of expenses of the employees- Food,Travel, Mobile etc. every month engaged through our pay roll. Earlier before GST we raised bill with service tax and paid it to concerned employees. Whether those reimbursement will fall within the ambit of pure agent expense - we are not making any separate service charge for this.
Thanks & Regards,
S K Bandyopadhyay
No these will not fall within ambit of pure agent. Expenses incurred are for the purpose of provision of services.
I am a distributor of fmcg product .my company ask me to make payments of display on there behalf to unregistered retailers. And raises a service invoice adding 18%gst TO get reimbursement. If i raises a gst service invoice i have to show in my P/L a/c onthe other side i have to show as expense .iif total amount of display paid to different retailers are rs 60000 than i have to pay rcm on it .
Is there is any other way out for the reimbursement to take from co.
We, a small company need some clarity on GST issue when invoicing our clients. We have taken some Interior designing project for a client; billed them the amount as per the estimate. Now our Out of Pocket expenses incurred on the project work are given to client separately (separate from the project invoice) with exact bills and we are billing exact amount, no overages for administration etc. On some bills such as food GST was charged, one or two minor bills the vendor themselves doesn’t have GST such as a small car owner whose car we used . Anyway point of all this background stuff, is to ask that say the OPE bill is a certain amount, we have bills to prove, and we are charging that exact amount to the client. Do we add 18% GST on the OPE bill?
Our accountant has said we must charge GST, our client says we must not charge tax. What do we do? Also can you tell me the GST law, the provision so I can quote it, as needed to our client? Thanks a lot
Our company is an MNC and when the Colleagues from our group company visit India, we spend on their travel expenses in India like booking tickets for Mumbai to chennai, Coimbatore to Customer place in India etc., and finally the group (foreign) Company (in which the Colleague is on roll) would reimburse us the ticket amounts and we would provide debit note (In EUR) for the same. Is this taxable under GST?
I have a few queries that I need help on:
We are a company providing professional services to companies in Training and delivery of workshops at their venue. All persons who execute services work on a contract with XYZ Pvt. Ltd. company. Does that make them a 'pure agent'?
While executing services, there are expenses for conveyance, food, transportation, goods/material purchased on behalf of the client/customer. We pay for this (including GST) to the vendor and then claim reimbursement XYZ Pvt. Ltd. company we have a contract with along with raising invoices to them for professional fees. Currently, we are being asked to raise GST over both, invoice as well as debit note (reimbursements). Is that accurate?
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