Service Tax liability on Air Freight to be recovered from Foreign Party

[Pradeep Jain]

Dear Sir,

We have sent abroad some sample of raw-materials for testing purpose to our overseas buyer . The Air freight amount is be paid along with Service Tax by our company. to Freight forwarder.

Now the said amount to be recovered from the Overseas buyer for this purpose we need to raise invoice / debit note.

Do we need to charge service tax for reimbursement of the said amount .

Regards

Pradeep Jain

[KASTURI SETHI]

Taxes and duties cannot be "exported" in any form or way.

[YAGAY and SUN]

Reimbursement of expenses duly attracts ST w.e.f. 2015 Budget. Please also check your agreement with your foreign customer.

[Ganeshan Kalyani]

Reimbursement is taxable. However if it is supported by documentary proof then, in my view, no service tax should apply.

[YAGAY and SUN]

Further in continution to our earlier reply, Pure Agent concept will not work in your matter since conditions as mentioned in the Pure Agent concept would not be duly fulfilled by you/your client in this matter.

AI Summary

Service tax on reimbursement: recovery from foreign buyer generally taxable; pure agent relief rarely applies.
Reimbursement of air freight and associated service tax paid by an Indian supplier and recovered from a foreign buyer is generally taxable following the 2015 Budget; taxes and duties cannot be exported. The Pure Agent exception is unlikely to apply given the facts, though documentary proof may affect treatment, and parties should review their contractual terms with the overseas customer.