TaxTMI 
TaxTMI 
Service Tax applicability on reimbursement of expenses
01 Jul 2006 
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Service tax on reimbursed expenses: liability arises on gross receipts even if tax is not separately billed to the client.
Reimbursement of expenses for statutory audits forms part of the taxable service value and attracts Service Tax on the gross amount received from banks irrespective of whether tax was separately billed. The reverse calculation method may be used to compute tax on inclusive receipts, and issuing a separate bill depends on mutual agreement. Valuation rule changes effective from 19.4.2006 make services provided after that date taxable even if tax was not billed; amounts subsequently received as service tax are also assessable. (AI Summary)
Reimbursement of expenses for statutory audits forms part of the taxable service value and attracts Service Tax on the gross amount received from banks irrespective of whether tax was separately billed. The reverse calculation method may be used to compute tax on inclusive receipts, and issuing a separate bill depends on mutual agreement. Valuation rule changes effective from 19.4.2006 make services provided after that date taxable even if tax was not billed; amounts subsequently received as service tax are also assessable. (AI Summary)
THE CHARTERED ACCOUNTANATS IN GENERAL HAVE NOT CHARGED SERVICE TAX IN THE BILL FOR RE-IMBURSEMENT OF EXPENSES SUBMITTED TO THE BANKS FOR STATUTORY AUDITS OF THE BANKS/ BRANCHES DONE FOR THE YEAR 2005-06. WHETHER THEY HAVE TO DEPOSIT THE SERVICE TAX IRRESPECTIVE OF THE FACT THAT HAVE CHARGED OR NOT? WHETHER THEY SHOULD ISSUE THE SEPARATE BILL/DEBIT NOTE TO THE BANKS AND ON THE RECEIPT OF THE SAME THEY SHOULD DEPOSIT?