GST Implication for Reimbursement on Declaration Basis

[Joydev Dasher]

As per terms of engagement as an advisor on retainership basis, I receive certain monthly amount by raising invoice on which GST is duly applied. Additionally, I receive

(i) monthly reimbursement towards local travel equivalent to certain litres of petrol and

(ii) for travelling outstation, a sum of money towards travel incidentals.

Both the amounts are reimbursement on declaration basis and I do not have bills/ receipts for the entire amount. These are not parts of my invoice either. Not sure if 'pure agent' criteria get fulfilled. Do I have to pay GST on either of these? Since the amounts are not on invoice, how to deal with that. Thanks.

[KASTURI SETHI]

Amounts received by you without invoice are on record. You do not conform to the conditions of Pure Agent laid down under Rule 33 of CGST Rules. These should form the part of transaction value as per Section 15 of CGST Act.

[Joydev Dasher]

Thank you for very clear clarifications. Will process how to deal with that.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Foremost, Section 15 r w r 27 to 35 contain valuation.

Section 15(2)(c) specifically states:

"incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services"

Therefore, GST has to be collected and remitted to the department. Period. There is no room for ambiguity.

Secondly, coming to the issue at hand - how do I do it?

Kindly issue a debit note to the service recipient towards reimbursement of travel costs duly imputing GST on the same. From the next time you may include these reimbursements in your invoice itself.

Thirdly, pure agent is defined in Rule 33. Your reimbursements do not get covered under 'Pure Agent'. Then, what gets covered? If you were to remit fees (MCA fees...) or taxes on behalf of your client then these are called pure agent services. The amount must be remitted at the request of the service recipient.

Trust this clarifies. Thanks

[Joydev Dasher]

Thank you very much for the clarity.

Actually, the part-time advisory role is a post retirement position in the same organisation and the engagement letter provides the same facilities as I got as an employee in the same position before retirement. Effectively, only salary has converted into advisory fees attracting GST which they pay. They said GST is not applicable to these petrol / travel allowances as I am certifying (online system of the organisation) that the amount claimed have actually been spent. However, one-to-one matching of spending can not be evidenced by me and I also work for other service recipients making my spendings fungible.

I was thinking to avoid undesirable GST traction, I can pay GST without charging. I do not know how that is possible as the org would not allow me to include it in invoice and If I pay saying that it is received from the org, I am not sure if it can have compliance implication for the organisation. That's the bind.

Thank you again.

[Raam Srinivasan Swaminathan Kalpathi]

You can remit the taxes on cum tax basis as provided in Rule 35. Assuming the reimursements from the organisation is Rs.10000/- kindly prepare a debit note for Rs. 8475/- (10000 X 100/118) and charge IGST or CGST and SGST and report it at the portal. The service recipient organisation should have no reticence in this arrangement. They may even choose to ignore availing the resultant ITC. Of course, you will suffer the GST amount for no fault of yours. Nonetheless, you will save yourself from possible future Notices from the department.

[Joydev Dasher]

Thank you, Got it. Still, the org being a govt org, may TDS questions

[VIPUL JHAVERI]

Basically seems this are flowing in from your agreement with client - and not carrying cover up for fees in alternate forms, so you still have a chance to go gst free, petrol allowance if you can demonstrate distance and usage it will sail through like wise travel also would have actual spend getting received back from client and is as per agreement per record, it may involve friction but once you decide to start paying off it will be then regular so nothing wrong in taking strong defence if intentions and facts are pure but if otherwise better to pay off and buy peace of mind and bear gst as cost as compnay anyways will not be paying you for same

[Joydev Dasher]

Thank you; I am wrestling with the dilemma. Petrol is anyways GST free. But without receipts for the entire amount (using metered taxi, autorickshaw, etc. - uber type rides have receipts) and the assessing officer may dispute it as petrol. It's not always that the entire amount is consumed. Actually, as an employee, the whole such amount received on declaration basis was treated as perks for IT purpose. It would still be but GST seems unfair. Same about Rs. 1000-2000 per day you get as out of pocket during travels. Actually, after paying GST and Income Tax, it does look like more trouble than worth, generating a couple of invoices a month if I have to approach a GST consultant. I maintain my own accounts and file my own returns so far.

[Ryan Vaz]

In your fact pattern, GST is likely payable on both reimbursements unless you strictly satisfy Rule 33 "pure agent" conditions.

Your two reimbursements appear to be:

• linked to your own provision of advisory services,
• not supported by third-party bills in client's name,
• not separately reflected in GST invoice,
• partly paid on declaration/allowance basis rather than exact actuals.

Therefore, tax authorities would generally treat them as part of the consideration for your advisory services under Section 15.

The fact that the amounts are currently "outside invoice" does not automatically make them non-taxable. If taxable, they should ideally be brought into invoicing/documentation and reported in GST returns.

[Joydev Dasher]

Thank you, that looks like the most linear option. However, the organisation has to be persuaded.

[Ryan Vaz]

Safer Compliance Approaches

Option A - Conservative / safest approach (recommended)

Include reimbursements in invoice.

Example:

Particulars	Amount
Advisory retainership	Rs. 1,00,000
Local travel reimbursement	Rs. 8,000
Outstation travel reimbursement	Rs. 12,000
Taxable value	Rs. 1,20,000
GST @18%	Rs. 21,600

This is the cleanest litigation-avoidance approach.

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Option B - Try to structure future transactions as Pure Agent

Possible only if:

• engagement letter specifically authorises you as pure agent,
• actual third-party bills available,
• exact actuals recovered,
• separately shown in invoice,
• no markup,
• client is actual recipient of third-party service.

Example:

• air ticket booked in client's name,
• hotel invoice in client's name,
• exact recovery only.

Even then, local petrol/conveyance used by you personally usually remains difficult to defend as pure-agent recovery.

---

Accounting / Documentation Aspect

If you continue current structure:

• amounts outside invoice,
• no GST,
• no supporting bills,

then there is meaningful audit/litigation risk.

Better practice:

1. either invoice them with GST, OR
2. maintain:
   • contractual pure-agent clause,
   • authorisation emails,
   • supporting vouchers,
   • separate recovery statement.

[Joydev Dasher]

Thank you very much

[Shilpi Jain]

You would be required to pay GST on these reimbursements as these are not pure agent reimbursements

[Joydev Dasher]

thank you for your categorical answer

AI Summary

GST valuation of reimbursement claims turns on pure agent conditions and separate invoicing for travel-related recoveries.
GST valuation of reimbursement amounts received by an advisor depends on whether they satisfy the pure agent conditions under Rule 33 of the CGST Rules. Reimbursements for local travel and outstation travel incidentals received on declaration basis, without third-party bills in the recipient's name and without separate invoicing, are generally treated as part of the taxable value under Section 15 of the CGST Act and subjected to GST. Pure agent treatment requires authorisation, exact recovery of actual third-party expenditure, and separate disclosure in the invoice.