Amount consideration

[d.v. gupta]

one of my client is a CUSTOM HOUSE AGENT. HE IS PAYING FREIGHT AS WELLAS OTHER EXPENSES ON BEHAF OF HIS CUSTOMERS. HE BILLED THE CUSTOMER FOR EXP. INCURRED ON THEIR BEHALF AND PROFESSIONAL CHARGES FOR HIS WORK. KINDLY ADVISE WHETHE WE SHOULD TAKE THE GROSS AMOUNT FOR SAL/ RECEIPT OR ONLY PROFESSIONAL CHARGES

[Mukesh Kumar]

As per the provisions of service tax, the expenses incurred in the capacity of pure agent are not forming part of gross amount charged for providing taxable services. You need to visit the terms and conditions of your contract to ascertain the facts. whether CHA is earning any profit out of the expenses incurred on behalf of the client is a substantial and crucial point which helps to determine the issue.

AI Summary

Pure agent treatment: expenses recovered on behalf of clients excluded from taxable gross amount under service tax.
Expenses recovered by a Customs House Agent qualify as exclusions from the taxable gross amount only if they are pure agent reimbursements; contract terms must show the CHA acted solely as agent, identified the supplier, paid on behalf of the client, and earned no profit-any profit or markup will render recovered expenses part of the gross amount for service tax.