Recovery of expense from customer

[KARAN VERMA]

Sir, i am taking services of contractor labour for some work related to my customer. Now, contractor raise invoice on me for the work with GST.

And I want to recover the same expense from customer.

Can I required to raise GST invoice for recovery of same expense. If yes, whether i am eligible to claim ITC on invoice raised by contractor on me.

Except above, my all other supplies are Non GST supplies.

[Rajagopalan Ranganathan]

Sir,

What is the nature of service provided by you? If it is exempted/non-GST then the gst charged by your labour contractor will become part of the cost since the service provided by you is exempted/non-gst you are not eligible to availITC.

[Ganeshan Kalyani]

Here, there is one to one co-relation. I mean, though your normal supplies are non-gst , but , in my view, this single transaction is to be treated separately.

You can raise a tax invoice on your customer as 'support service' by charging GST. You can take credit of the GST charged by your labour contractor on you. You can keep the amount of the transaction same (if you had not made any margin) so that credit is equal to liability.

[Ganeshan Kalyani]

Or, you can ask your labour contractor to raise invoice on your customer (actual recipient of service) directly.

[YAGAY and SUN]

Please review the terms and condition of the contract which you entered with the contractor and with your customer to avail the ITC and charge the GST accordingly.

AI Summary

Input Tax Credit: claimable when expense recovery is treated as taxable support service; disallowed where your supply is exempt.
Whether GST should be charged when recovering contractor labour costs and whether the principal may claim ITC depends on the taxability of the principal's supply: if the principal's supply is exempt/non GST, GST paid to the contractor is part of cost and ITC is not available; alternatively, the recovery may be treated as a separate taxable support service (with a tax invoice and GST charged) enabling the principal to claim ITC, or the contractor can invoice the customer directly; contractual terms must be reviewed.