GST applicability for Reimbursement of Salary(Pure Agent) - on behalf of Indian Company

[Ojas Shah]

Dear Sir/Madam,

Kindly let me know about the GST applicability for Reimbursement of Salary By a Company A on behalf of Indian Company B.

Where the company A making payment does not provide any other service/supplies to the company B other than the reimbursement of Salary.

Thank You !!

[KASTURI SETHI]

The following decision may help you :-

2019 (20) G.S.T.L. 471 (A.A.R. - GST) = 2018 (12) TMI 893 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA IN RE : DRS MARINE SERVICES PVT. LTD.

[Ojas Shah]

Dear Sir,

Thank You for your reply !!!

But here the question is that both the company are Indian Domestic Company also the neither of the company is Recruitment Agency and nor any of the services is provided between the party. It is mere sister concern.

[KASTURI SETHI]

You have not gone deeply into this decision. Your issue is not fully covered by this decision. The ratio of the judgement is applicable to you. You must know the difference between Reimbursement and Disbursement. Moreover, every kind of reimbursement is not taxable. Reimbursement is not service. It is not consideration. Reimbursement takes the form of 'consideration' only when reimbursement is received against taxable supply . Where is supply in your case ? In my view, in this case GST is not applicable.

[Ojas Shah]

Thank You Sir.

I was confused as there was case about salary paid on behalf of foreign entity.

Now got clarified.

AI Summary

Reimbursement of salary: genuine pass-through payments not constituting consideration are outside GST if no taxable supply exists. GST on salaries paid by one company on behalf of another turns on whether the payment is a genuine reimbursement (a non-consideration pass-through) or payment for a taxable supply. If no service is provided by the paying company and the amount is not received against a taxable supply, the payment does not constitute consideration and is not subject to GST.