service tax on re-imbursement of electricity charges

[GOPAL HARLALKA]

Whether service tax is payble on the re-imbursement of electricity charges in a housing complex, where electricity charges are collected and paid to the electricity provider on behalf of the residents ?

 

 

[YAGAY and SUN]

Re-imbursement of expenses on acutal basis won't for part of the taxable amount for the purpose of calculating the Service Tax while provide the taxable service.  This aspect has been clarified in the following judgment:-

 

As a major relief to all the service providers, Delhi High Court in Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India (2012) 12 TMI 150 (Delhi) has over ruled this provision stating that imposing Service Tax on reimbursements is not in the scheme of law and such a provision is ultra vires (illegal) the Act itself.

[sanjeev bajaj]

 No Service Tax as the provider of service is acting as Pure Agent according to Service Tax( Determination of Valuation) Rules, 2006 and fulfils the conditions laid down in Rule  5 of the said rules.

 

AI Summary

Reimbursement of expenses for third party electricity charges excluded from taxable service value when provider acts as Pure Agent.
Reimbursements of electricity charges remitted to a third party supplier on behalf of residents are excluded from the taxable value when made on an actual disbursed basis and where the provider functions as a Pure Agent under the Service Tax (Determination of Valuation) Rules, 2006; a cited judicial view treats taxing such reimbursements as ultra vires the charging scheme.