Reimbursement of expenses Import of Service- Service tax chargeability

[Asked by Guest]

Dear Sir,

Is Service tax chargeable on reimbursement of expenses in case of import of Service. Service such as a video conference was held in the Ho office of Mumbai and for the authority for SYSTEM USAGE CHGS-VIDEO CONFERENCE SYSTEM WITH our Parent company (Japan) charges were paid. Please explain regarding this, Pls give any reference regarding this. Thanks and regards.

[YAGAY and SUN]

Yes, from this budget reimbursement of expenses would be added in the taxable amount to calculate and payment of service tax.

[Manoj Agarwal]

The Valuation rules are same for import of service and domestic services. The proposed amendment in section 67 of the Finance Act has the effect of nullifying the Delhi High Court judgment in the case of Intercontinental Consultants and Technocrats which held in favor of assessee regarding reimbursement of expenses.

So, after the Finance Bill 2015 is enacted by the assent of the President, reimbursements except as 'PURE AGENT' shall be chargeable to service tax.

AI Summary

Reimbursement of expenses included in taxable value for import of services except when treated as pure agent.
Reimbursements are to be included in the taxable amount for computation of service tax on imported services unless they qualify as a pure agent. Valuation rules for import of services mirror domestic rules, and the Finance Bill 2015 amendment is said to nullify a prior judicial decision; upon enactment, reimbursements not meeting pure agent criteria will be chargeable to service tax.