REIMBURSEMENT OF EXPENSES ON AIR TICKETS

[ROHIT GOEL]

WHETHER A SERVICE PROVIDER WHO GET REIMBURSEMENT OF TRAIN TICKETS, AIR TICKETS ON ACTUAL BASIS LIABLE TO PAY GST @18% ON THE COST OF TICKETS

[Ganeshan Kalyani]

Can you please elaborate your query with an example.

[ROHIT GOEL]

Example: A chartered Accountant travel by air and cost of air ticket reimbursed by client. Question whether gst is to be charged on cost of air ticket along with audit fees

[KASTURI SETHI]

NOT required to pay GST on cost of tickets. Cost of ticket cannot be part of transaction value because it does not go into your pocket. You pay and then get reimbursement. GST already paid. No double taxation.

[DR.MARIAPPAN GOVINDARAJAN]

Whether the service provider can take input tax credit on the air ticket of Chartered Accountant?

[Alkesh Jani]

Sir, In this regards, I bit confused, as Air ticket can be Input Tax Credit for CA and CA can give discount of taxes taken as input tax credit. Your special guidance is required please

[Himansu Sekhar]

Yes, it will be a part of the value. Gst will be applicable on it. The expenses are in relation to the taxable supply

[KASTURI SETHI]

Can be part of value if he is not pure agent.

[Ganeshan Kalyani]

Chartered Accountant has to include travel expenses in his professional fees to work out GST payable. He is not pure agent in this case.

[JAIPRAKASH RUIA]

in my view, If the ticket are in the name of CA, CA has to take the credit of GST charged in bill and bill to client with applicable GST rate ( As applicable on fee) on the value of fee, inclusive of ticket value net of GST (irrespective of the rate of GST on ticket),

However, If the ticket is directly in the name of client but paid by CA, then pure agent concept comes in picture. In that case also the CA will bill separately for ticket inclusive of GST amount without creating liability for GST but for that all the condition of pure agent has to be fulfilled by client as we as pure agent.

[KASTURI SETHI]

Yes. Sir. I agree with you to the extent of concept of pure agent. C.A. works as pure agent also.

[Himansu Sekhar]

With humility I slightly differ from Sri Ruia's view.

As per Rule 33 of the CGST Rules,2017 .Value of supply of services in case of pure agent.-Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression “pure agent” means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

(c) does not use for his own interest such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B.

In the instant case, the expenses towards the travel are n the interest of the client. It is not a pure agent concept. Be that the case, every body will not include many expenses like Hotel bills, Restaurant bills and other expenses incurred by the CA during the provison of the service.

[Ganeshan Kalyani]

CA should not enjoy the benefit of air travel. He just has to incur the cost. The benefit shall be taken by the client. If this is the case then pure agent concept .works. But the fact is client engages the CA to render service. For rendering the service CA need to travel which is his expense so as to render service. Client is interested in main service. Client will not enjoy the travel service. These instances does not satisfies the conditions of the pure agent concept. Hence GST is applicable on such reimbursement. Thanks.

AI Summary

Pure agent exclusion may exclude reimbursed travel costs from taxable value if strict agency conditions are satisfied. Reimbursements of air or train tickets are excluded from taxable value only when the supplier qualifies as a pure agent: acting on recipient authorisation, separately indicating third party payments in the invoice, procuring supplies in addition to its own services, holding no title, and receiving only the actual amount incurred. If these conditions are not met-such as where travel is in the supplier's name to enable service-ticket reimbursements form part of the consideration and attract GST; input tax credit treatment depends on the general input tax credit provisions.