GST on reimbursements

[Madhavan iyengar]

Company A is based in India and sells the products in India to customers These products imported from its Parent B located in USA

Company A incurs marketing and advertising expenditure and this expenditure is reimbursed by Parent company B ( ie back to back reimbursement)

Query: Will the reimbursement of marketing and advertisement expenses received by Company A in India from its Parent B Located in USA liable for GST in the hands of Company A

[Rajagopalan Ranganathan]

Sir,

Marketing and advertisement expenditure are includible in the value of service provided provided.Therefore gst is payable on such reimbursements since the same will form part of consideration received for selling the products pf B by A in India.

[KASTURI SETHI]

I am also of the same view as opined by Sh.Ranganathan Sir.

[Madhavan iyengar]

Renganathan sir and kasturi sir

Thanks

additional points to be considered is if the indian company is not able to recover the marketing cost locally ie it is selling at a lower price due to market constraints so taxable value will be lower and since in gst it is transaction value there wont be any questions on value at which tax is discharged

so in above case will the reimbursements taken for marketing expenses from parent have any implication on gst

[KASTURI SETHI]

Sh. Madhavan Iyengar Ji,

In my view, Scehedule-I is here applicable. The words, "not able to recover" has no place.

[Madhavan iyengar]

kasturi sir

The Reimbursements taken from the parent is a back to back costs so under which head will it be taxable since there is no underlying supply between indian company and its parent foreign company it is only reimbursement of costs which is being reimbursed

the services was firstly procured by indian company for its business and now it is only getting a reimbursement from the foreign parent company kindly give your views

[KASTURI SETHI]

Dear Sir,

You have said, "The products are sold in India". Thus marketing and advertisement services are being provided in relation to the said products. These are consumed in India. Pl. see Section 13 (6) of IGST Act in this context.

[SUSHIL BANSAL]

Sir,

In my view incurring expenses & claiming the same amount from Co. B is a pure agent relationship and hence there is no GST implications.

AI Summary

GST on reimbursements: taxability depends on whether marketing cost recoveries are taxable consideration or pure agent pass through. Treatment of reimbursements for marketing and advertising hinges on whether they are taxable consideration forming part of the value of supplies made in India or are pure agent pass through recoveries. Contributors argue both positions and reference the transaction value principle and Section 13(6) IGST, emphasising factual tests: contractual linkage to sale, principal versus agent role, and separate invoicing and identifiability of the reimbursed costs.