Required clerification on Reimbursement of expenses & cenvat credit thereon

[RAM SHARMA]

Dear Experts,

The Hon’ble President has given assent to the Finance Bill, 2015 on Thursday, May 14, 2015. Accordingly, the Finance Bill, 2015

Now as per Section 67: Amendment in definition of the term ‘Consideration’to include:

a) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed like Pure Agent.;

1) According to this rule,

Whether service tax payable on all reimbursable expenses is applicable including taxable services paid by service provider (CHA) on our behalf like govt. fee & custom duty etc.

2) Secondly, We are giving all reimbursable expenses to our consignment agent like freight and handling charges etc up to the end user. We are also giving commission on sale to our consignment agent and availing cenvat credit on such commission.

Whether we are eligible service tax credit on freight and handling charges which is reimburse by the company to own consignment agent.

With Regards

AI Summary

Reimbursable expenses as consideration may attract service tax, provoking tension with case law on reimbursement nexus.
The Finance Bill, 2015 amendment would include reimbursable expenditures charged by a service provider within the definition of consideration for service tax, subject to prescribed exceptions like pure agent. Queries arose whether statutory payments reimbursed to providers and reimbursements for freight, handling and commissions to consignment agents attract service tax and whether CENVAT credit is admissible. Respondents took opposing stands: one treating statutory payments as non-taxable and allowing CENVAT on reimbursements tied to input services under Rule 2L, and another citing case law that reimbursement is not consideration absent a nexus with the service.