Applicability and liability of service tax on supervising and traveling expenses

[PRADEEP KUMAR]

We are manufacturer & material supplied to customer. During the erection, we have appointed one consultant or contract basis which name is franklin for supervision for erection. Franklin charged supervision exps on us & we have raised Debit Note for reimbusment of supervision charges to customer. (1) we have reimbusement of supervision charges, service tax applicable or not? if applicable, under which catagory? What about travelling exps? (2) If we appointed one employee & directly send to customer, we have charged for supervision in favour of customer, what about service tax on supervison exps and travelling exps? (3) if we have changes name of Deputation from supervison, what about service tax on Deputation & travelling exps? (4) IF Word changes inspection charges from supervisin charges, what is impact of service tax, liable or not?

[Guest]

First of all you have see that if you are acting as pure agent of your customer for getting the services of franklin, you would not be required to pay any service tax on reimbursement of expenses through Debit note raised on your customer. Further, in case you are not acting in capacity of pure agent, you need to see the nature of service being provided by the supervisor i.e Consultancy Service or Management Service or some thing else. According to the nature of service, you need to determine the category of taxable service and classify the service. You should mind it that Deputation or Supervision charges itself is not charging activities under service - it is the nature of service that is being provided would determine the taxabillity of service.

[Prabhakar Vennalaganti]

The levy of service tax is based on the services rendered and not on the basis of nomenclature how it is appearing in your realization document (Invoice / Debit Note).From the information provided, we can say that conveyance expenses which are reimbursed will not attract any service tax. The leviability of service tax on supervision is to be analyzed interms of what type of supervision is conducted and the how the price id determined, keeping the valuation act/rules and service tax act/ rules in view.

AI Summary

Service tax on reimbursement hinges on pure agent status; classification of supervisory services controls liability. Applicability of service tax on supervision and travel reimbursements turns on whether the supplier is acting as a pure agent; reimbursements made as pure agent pass-throughs are not taxable. If not a pure agent, the supervisory activity must be classified by its true nature (consultancy, management, etc.) to determine taxable service category. Conveyance or travel reimbursements treated as outlays do not attract service tax. Nomenclature such as deputation, supervision or inspection does not determine liability; valuation rules and the statutory service classification govern chargeability.