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Service Tax liability on reimbursible expenses

samiuddin ansari

Hello...Good morning sir,

Recently, on being paid visit by Audit team in my friend's unit engaged in rendering taxable services as clearing and forwarding agency, they have raised observations in respect of expenses incurred by him on behalf of their clients/customers and reimbursed the same from them by raising invoices (showing in invoice but counted in taxable value) as well as debit notes. The audit team stated that such reimbursed amount would also form part of the gross taxable income w.e.f 14.05.2015 as amended by Finance Act, 2015 in terms of Section 67 of the Finance Act, 1994.In other words, such expenses would not form part of gross taxable value, but after amendment all the reimbursed expenses would be added in gross taxable value. Here, I solicits your valuable suggestion as to whether I should disagree with the objection as audit period covers between 1.04.2014 to 33.03.2017 or deposit the amount as pointed out. And also provide necessary circular, instruction etc. issued by the Board.

 

Reimbursable Expenses Taxable Post-2015 Amendment: Section 67 Update on Service Tax and Pure Agent Criteria An individual sought advice on whether reimbursable expenses should be included in the taxable value for service tax purposes after an audit team raised concerns. The discussion revealed that prior to May 14, 2015, reimbursable expenses were not taxable unless incurred as a pure agent. The Finance Act, 2015 amended Section 67 to include such expenses in the taxable value. Various experts advised that if the service provider acts as a pure agent, these expenses should not be taxed. However, a written agreement is essential to qualify as a pure agent. Additionally, guidance was provided on pre-deposit procedures for appealing penalties. (AI Summary)
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