Service tax on out of pocket expenses

[Guest]

WHETHER OUT OF POCKET EXPENSES RECOVERED ON ACTUAL BASIS FROM CLIENT IS LIABLE TO SERVICE TAX OR NOT. SECONDLY,IS THERE ANY AMENDMENT/CIRCLAR/NOTIFICATION HAS BEEN ISSUED IN THIS REGARD.

[Guest]

Reimbursements of any expenditure/costs incurred in the course of providing the service is to be included in the cost of service and liable for tax. Only exception is if the expenditure is incurred as a 'pure agent'. You may refer Service tax (Determination of Value) Rules, 2006 for full details.

[Guest]

the pocket exp will not be liable for service tax and it should be charged separately

AI Summary

Pure agent exception limits taxation of out-of-pocket reimbursements; otherwise such costs form part of taxable service value. Reimbursements of out-of-pocket expenses recovered from clients are generally included in the taxable value of a service and liable to service tax, unless the amounts qualify as a pure agent under the Service Tax (Determination of Value) Rules, 2006; the document notes one reply citing those rules and another dissenting view.