whether service tax is applicable on esic reimbursment

[Pandit Bhagat]

Dear sir,

Kindly confirm whether service tax is applicable on esic reimbursement from company in separate bill.

Regards,

Pandit Bhagat

[Ganeshan Kalyani]

If the claim is supported by documentary evidence then in my view service tax is not applicable.

[Rajagopalan Ranganathan]

Sir,

If the esic reimbursement is in respect of security guards, or man power supplied by a contractor and if the gross amount charged by the contractor includes salary of guards, employer's ESIC, PF contribution towards labour fund, bonus, leave, uniform etc., then the service tax is payable on the gross amount charged by the contractor.

If the same is in respect of employees employed by you then it is paid out of employer-employee relationship and the same is not liable to service tax.

[YAGAY andSUN]

The principal of pure agent shall applicable in this matter as this is being payable to ESIC on behalf of the company by the contractor i.e. (pure agent). We endorse the view of Ganesan Kalyani.

[KASTURI SETHI]

I support the views of Sh.Ganeshan Kalyani, Sir and M/s.YAGAY AND SUN, Sirs.

[Sonali Sharma]

Element of service is missing that mean no service has been provided in this transaction and secondly it is not a declared service, so no service tax is applicable.

[KASTURI SETHI]

Here is not the issue of 'Declared Service". There are so many other services which are not declared ones but these are services. Here ST is not applicable, reimbursement in itself is no service.

Declared Services mean no dispute about the nature of service having legal validity. For example; 'Renting of Immovable Property' was challenged whether it is service or not. Now dust settled.

[Sonali Sharma]

For service tax purpose, transaction has to be seen on two accounts and if any one exists then service tax is leviable (ofcourse if it is not exempted otherwise by any notification)

1. Whether element of any service exists in the transaction

2. If not, then whether transaction is a declared service

So concept of declared service is required to be seen before squarely ruling out applicability of service tax.

ESI reimbursement are not covered under any of above 2 points, thus no service tax is require to be paid.

[KASTURI SETHI]

There are basic three parameters for the purpose of levy of ST and these are :-

1. Thereservice provider of Taxable Service.

2.There must be Service Receiver.

3.There must be consideration .

If one of the elements is missing, the chain is broken. These are very much basis ST laws.

AI Summary

Service tax generally not applicable to ESIC reimbursements unless involving contractors supplying manpower. 'Pure agent' principle discussed. A forum discussion debated whether service tax applies to ESIC reimbursements. The consensus among participants was that service tax is generally not applicable if the reimbursement is supported by documentation and pertains to an employer-employee relationship. However, if the reimbursement involves contractors supplying manpower, and the gross amount includes various labor-related costs, service tax may be applicable. The principle of a 'pure agent' was mentioned, indicating that if the contractor pays ESIC on behalf of the company, it might not attract service tax. Overall, the absence of a service element or declared service means service tax is not levied.