GST on cross charge/Reimbursement within India and outside India

[Shrikanth Parmarthy]

Hi experts,

Scenario 1:

Employee from Indian Company A travelled to Sister concern in Europe - Company B. The travel and hotel related expenses in Europe were borne by Company A and now the company A in India wants to charge those expenses to Company B without mark up. 

Query : Will the cross charge be treated as supply and GST is applied on the same. If yes what is the GST rate

Scenario 2:

Employee from Indian company A located in Tamilnadu travelled to Subsidiary Company in Maharashtra - Company B. The travel and hotel related expenses  were borne by Company A and now the company A in India wants to reimburse those expenses without mark up. 

Query:Will the cross charge  be treated as supply and GST is applied on the same. If yes what is the GST rate

[Rajan Kumar and associates]

In both scenerio, yes cross charge will be applicable for market value of the service provided. The rate of tax will be 18%. This is my view

- Aivar

[Sadanand Bulbule]

Scenario 1: Yes, it is a supply, but since the recipient is abroad, it qualifies as export of service, so GST = 0% (zero-rated) if payment comes in foreign exchange.

Scenario 2: Yes, it is a supply between distinct persons within India, so IGST @ 18% is applicable (subsidiary can claim ITC).

[Shilpi Jain]

More Facts needed. In scenario 1 - what is the reason that the employee has gone abroad? Is there is supply made by Company A through this employee? whether that itself will be taxable and the travel exp recovered is only a incidental amount to that?

In second case if Comp B eligible for full credit no need for cross charge.

 

[Shilpi Jain]

Also in scenario 2 additional facts required

AI Summary

GST on cross-charge of travel and hotel expenses: export zero-rated if paid in forex; domestic IGST 18%.
Cross-charges of travel and hotel expenses are treated as supplies invoiced at market value. Cross-charges to foreign recipients may be zero-rated as exports if payment is in foreign exchange and factual conditions support export treatment; cross-charges between distinct persons in India attract IGST with the recipient eligible for input tax credit where entitlement exists.