travelling & conveyance expenses hsn code

SAC 998559 Other travel arrangement and related services n.e.c

SAC (Services Accounting Code) code 998559 is classified under group 99855 (Travel arrangement, tour operator and related services) of GST services classification. Group 99855 is classified under heading 9985 (Support services). You can check GST tax rate on 9985, Support services .

Decoding SAC 998559

Gst on other travel arrangement and related services n.e.c.

We have filtered GST applicable on Travel arrangement, tour operator and related services including GST on Other travel arrangement and related services n.e.c, GST on Support services. You can GST on group Travel arrangement, tour operator and related services by visiting this link.

• New at Marg
• Integrated Banking

RETAIL SOFTWARES

DISTRIBUTION SOFTWARES

MANUFACTURING SOFTWARES

Udhyog Ratan Award

OTHER SOLUTIONS

ERP  (CORPORATE SOLUTIONS)

MOBILE APPS

• Admin Login

Demystifying Travel HSN Codes: What You Need to Know

Table of Contents

Introduction

Traveling has always been a source of joy and excitement for wanderlust souls. Whether you’re embarking on a vacation, attending a conference, or exploring new cultures, travel opens up a world of opportunities. However, behind the scenes, there are various logistical aspects that need to be taken care of, including understanding the complex world of HSN codes. In this blog, we will demystify travel HSN codes and help you navigate through this crucial aspect of your travel planning.

Understanding HSN Codes:

HSN stands for Harmonized System of Nomenclature, which is an internationally recognized system for classifying goods and services. HSN codes are numerical codes assigned to different products and services for the purpose of taxation, customs clearance, and trade statistics. These codes are used by governments worldwide to categorize goods and services and streamline international trade processes.

Applying HSN Codes to Travel:

When it comes to travel, HSN codes play a significant role in determining taxes and tariffs applicable to various aspects of your trip. Here are some key areas where HSN codes are relevant in the travel industry:

Air Travel (HSN Code:

99) Air travel falls under HSN code 99, which covers various services related to air transportation. This includes the transportation of passengers, cargo, and mail by air, as well as related services such as aircraft leasing, maintenance, and ground handling. Airlines and travel agencies use this code to ensure accurate taxation and compliance.

Accommodation Services (HSN Code: Varies)

Accommodation services, such as hotels, resorts, and guesthouses, are classified under different HSN codes depending on their facilities and amenities. These codes can vary from country to country, but they generally fall under the broader category of “Accommodation Services” or “Hotel Services.” It’s essential to check the specific HSN code applicable to your chosen accommodation to ensure proper taxation and reporting.

Tour Operators and Travel Agencies (HSN Code: 9985)

If you’re planning your trip through a tour operator or travel agency, their services typically fall under HSN code 9985. This code covers a wide range of services provided by these entities, including arranging transportation, accommodation, and guided tours. Understanding this code is crucial for both the service providers and the customers, as it helps determine the applicable taxes and responsibilities.

Travel Insurance (HSN Code: 9971)

Travel insurance, which provides coverage for unforeseen events during your trip, is classified under HSN code 9971. This code covers various types of insurance services, including travel insurance, health insurance, and general insurance policies related to travel. If you’re purchasing travel insurance, it’s important to know the applicable HSN code for accurate taxation and reporting.

While HSN codes may seem like a complex and technical aspect of travel planning, understanding them is essential for ensuring accurate taxation and compliance. From air travel to accommodation services and tour operators, HSN codes are used to classify various aspects of your trip and determine the applicable taxes. By familiarizing yourself with the relevant HSN codes and seeking guidance from travel professionals, you can navigate through this aspect of travel planning with ease. So, the next time you embark on a journey, remember that HSN codes play a crucial role in making your travel experience seamless and hassle-free.

Read more useful content: 

• What is E-invoice?  
• E-invoicing Software  

Frequently Asked Questions (FAQs) on Traveling HSN Codes:

Q. What are HSN codes, and why are they relevant to travel?

Grow your business with Marg ERP! Easy GST invoices and filing.

HSN codes are numerical codes used to classify goods and services for taxation, customs clearance, and trade statistics. In the context of travel, HSN codes help categorize different aspects such as air travel, accommodation services, tour operators, and travel insurance for accurate taxation and reporting.

Q. How can I find the HSN code for air travel?

Air travel is generally classified under HSN code 99, which covers services related to air transportation, including passenger transport, cargo, mail, aircraft leasing, maintenance, and ground handling.

Q. Are HSN codes for accommodation services the same worldwide?

HSN codes for accommodation services can vary from country to country. It’s important to check the specific HSN code applicable to your chosen accommodation in the destination country to ensure accurate taxation and reporting.

Q. What is the HSN code for tour operators and travel agencies?

Tour operators and travel agencies typically fall under HSN code 9985. This code covers a range of services provided by these entities, including arranging transportation, accommodation, and guided tours.

Q. Is there a specific HSN code for travel insurance?

Yes, travel insurance is classified under HSN code 9971. This code covers various types of insurance services related to travel, including travel insurance, health insurance, and general insurance policies for travel-related events.

Q. How do HSN codes affect taxes and tariffs in travel?

HSN codes are used to determine the applicable taxes and tariffs for different aspects of travel, such as air travel, accommodation, and tour services. Understanding and applying the correct HSN codes ensure accurate taxation, compliance, and reporting for both service providers and customers.

Q. Do I need to know HSN codes as a traveler, or is it the responsibility of service providers?

While service providers such as airlines, hotels, and tour operators are responsible for using the correct HSN codes, it is beneficial for travelers to have a basic understanding of these codes. Knowing the relevant HSN codes can help you understand the breakdown of costs, identify any discrepancies, and ensure that you are being charged the appropriate taxes and tariffs.

Q. Can HSN codes change over time?

HSN codes can be subject to change or modification by respective authorities. It’s advisable to stay updated with the latest HSN codes relevant to the travel industry, especially if you frequently engage in travel-related activities.

Q. Where can I find more information about specific HSN codes for travel-related services?

You can refer to official government websites, tax authorities, or consult with travel professionals and experts who have knowledge of the specific HSN codes applicable to the travel industry.

Q. Are HSN codes only relevant for international travel, or do they apply to domestic travel as well?

HSN codes are applicable to both international and domestic travel. They play a crucial role in determining taxes, tariffs, and compliance for various travel-related services, regardless of the travel destination.

RELATED ARTICLES MORE FROM AUTHOR

Understanding the 7601 HSN Code: Exploring the World of Aluminum Unwrought Products

Understanding the GST Rate for 6907 HSN Code: An Overview

Understanding the 6907 HSN Code: Exploring the World of Ceramic Tiles

Demystifying Paper HSN Codes and GST Rates: A Comprehensive Guide

Decoding the HSN Code: Understanding Shirt Classification

Navigating Travel Expenses and the HSN Code: A Comprehensive Guide

Decoding the GST Rate for HSN Code 9503: Your Ultimate Guide

Demystifying Section 142(1) of the Income Tax Act: A Comprehensive Guide

Understanding the 7304 HSN Code: Exploring the World of Iron or Steel Tubes and Pipes

Leave a reply cancel reply.

Save my name, email, and website in this browser for the next time I comment.

• Terms & Conditions

• Popular Courses
• GST Return Filing
• More classes
• More Courses
•   Start a discussion
•   Unanswered
• Report Abuse

HSN code for reimbursement of expenses?

abhishek ghadi (fresher) (34 Points)

 6 Replies

Jeeva Thangavelu (Student CA Final ) (609 Points) --> Replied 09 May 2018

Both debit note & tax invoice cannot be issued. A voucher is considered as sufficient document. Reporting in GSTR-1 is also not required. 

Online GST Certification Course

abhishek ghadi (fresher) (34 Points) --> Replied 09 May 2018

GST cannot be charged on reimbursement. Refund the GST amount. Issue a fresh voucher for the same and cancel the invoice/debit note that had been issued.

john legend (376 Points) --> Replied 09 May 2018

Bijay Kumar Gupta. (Proprietorship ) (22 Points) --> Replied 04 December 2019

Leave a reply

Your are not logged in . Please login to post replies Click here to Login / Register   

Recent Topics

• Effective date of TDS rate
• How to get the rectification rights transffered to
• Income tax liability for public fund by coupon
• CA certificate for refund on account of supply mad
• GST surrender and ITC
• Reclaim excess TDS
• Seller not able to see 26QB approval request on in
• Where to hire a crypto recovery service
• I have missed due date to claim itc 01
• Issue related to ITR filing of deceased as Legal h

More recent discussions | Post

Related Threads

Popular discussion.

view more »

Trending Online Classes

5 days Certification Course on GST Practical Return Filing Process

LIVE Course on Foreign Exchange Management Act (FEMA)(with recording)

Mastering Power BI for Financial Analysis - Data-Driven Finance

Subscribe to the latest topics :

Search forum:.

Whatsapp Groups

Login at caclubindia, caclubindia.

India's largest network for finance professionals

Alternatively, you can log in using:

• Toll Free 1800 309 8859 / +91 80 25638240

Home GST SAC Codes for various transportation services under GST

SAC Codes for various transportation services under GST

Tally Solutions | Updated on: October 20, 2023

--> published date: | updated on: --> <--.

• Introduction of SAC Code

Which Transportation Services are Exempt under GST?

• SAC Codes with GST Rates

SAC Code: General Introduction

All goods and services transacted in India under GST are classified under the HSN code system or SAC Code system. Where services are classified under the SAC Code and goods are classified under the HSN Code .

Services Accounting Code also called as SAC Code is a classification system for services developed by the Service Tax Department of India. Using GST SAC code, the  GST rates  for services are fixed in five slabs namely 0%, 5%, 12%, 18% and 28%.

Note: If a service is not exempted from GST or if the GST rates are not provided, then the default GST rate for services of 18% would be applicable.

We have discussed here the  GST SAC code list  for Transportation Services under changed indirect tax law system of  GST India .

Services by way of transportation of goods are exempted:

• a goods transportation agency;
• a courier agency
• by inland waterways.

Only the service of transportation of goods by road continues to be exempt even under the GST regime . But GST is well applicable to a goods transport agency, GTA.

SAC Codes with GST Rates: For Goods Transport Services

Explore More Products

Tally Solutions | Nov-28-2019

• Business Guides
• ERP Software

Latest Blogs

Key Highlights for MSMEs from Union Budget 2024

Boosting Efficiency: Unleashing the Power of the Pub/Sub Model with AWS

Vulnerability Assessment and Penetration Testing: Essential for Organizational Security Beyond Compliance

GST e-Invoice Mandate: Including 6-Digit HSN for Wholesale Tax

TallyPrime on AWS – The Best Cloud Accounting Software

Top Causes of GST Notices Demystified

Compliance is NO MORE complex! Ease of e-invoicing & accurate GST return filing with TallyPrime!

Thanks for Applying

We will be in touch with you shortly.

Trusted by 3 Crore+ Indians

Want to Achieve any of the below Goals upto 80% faster?

Dream Wedding

Amount (in Rs)

Phone Number

GST Explained for Tour Operators and Travel Agents

Mar 22, 2024

GST on Tours and Travels: HSN Code and GST Rate on Travel Agents' Services

There are now two separate rates of GST on tours and travels, depending on the availability of input tax credits (ITC). Without ITC, a 5% GST is applied to the gross tour price, while an 18% GST rate is applied with ITC. These different rates have implications for both travelers and tour operators in terms of total pricing.

To understand more about the HSN code for tours and travels, as well as the GST on travel agents, read on.

Taxation Scope for Tours and Travels

The regulations of Goods and Services Tax (GST) offer tour operators three different options for operation and claiming input credits. Input tax credit (ITC) in GST refers to the tax amount that businesses can subtract from the tax owed on the purchase of goods and services.

Here is a detailed explanation:

1. Acting as a tour operator without ITC: In this scenario, a tour operator charges customers 5% GST on the total package but does not claim any ITC.

2. Acting as a tour operator and claiming ITC: In this case, a tour operator charges customers 18% GST on the total package and claims ITC. However, it is necessary to consider the place of supply rule when claiming ITC.

3. Acting as a pure agent: The role of a tour operator in this scenario is that of a facilitator. They act as an intermediary, raising an invoice to customers charging 18% GST. The actual expenses incurred for services like travel, hotel, and boarding are separately mentioned on the invoice and taken as reimbursements from the customers. Proper records of these expenses must be maintained by the tour operator.

Value of Supply for GST on Tours and Travels

If a tour operator works as a pure agent, they can exclude the expenses incurred by the service provider from the value of their supply. This enables a more accurate determination of the tax liability, ensuring that tax is levied only on the actual service provided by the pure agent.

Time of Supply for GST on Tours and Travels

The time of supply for GST depends on whether the tour operator is acting as a pure agent or not.

If they are not acting as a pure agent, GST should be charged and paid at the time of payment or issuance of the invoice, whichever occurs earlier. In such cases, the tour operator should recognize its revenue on a payment basis for GST purposes.

However, if the tour operator chooses to act as a pure agent, GST should be charged at the time when the final invoice is raised or when the commission is received, whichever happens earlier.

Place of Supply for GST on Tours and Travels

When making a hotel reservation, the place of supply is determined by the city in which the hotel is located. The hotel will include GST in its invoice. However, if the company is not registered for GST in that specific place of supply, it cannot claim ITC on that invoice.

The same applies to flight tickets, where the place of supply is the place of flight departure. If the tour operator is not registered under GST in the state from which the flight departs, ITC cannot be claimed for that invoice.

GST on Tours and Travels with HSN Code

Under Heading 9985 of the GST Tariff Act, the applicable GST rate for tour and travel services is 5% if the following conditions are met:

1. The tour operator providing the services will not be eligible for ITC on services like hotels and air tickets, but ITC can be claimed on tour operator services obtained from another tour operator.

2. The tour operator must indicate in its invoice that the charged amount is the gross amount and includes charges for accommodation and transportation.

Here is a tabular representation of tours and travels SAC code and GST on travel agents’ services:

Description SAC GST rate

Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India. 9985 Nil

Air Ticket Booking Services by Agents 998551 18%

Sale of Tour Packages 998552 5%

Service Charge paid on travel-related services like Visa, Passport, etc. 998555 18%

Booking of Hotel/Cruise by Agent 998552 2%-18% with ITC or 5% without

Commission of Rail Travel Agents 9967 18%

Rent-a-Cab Service 9967 5%

Other renting services 998559 18%

Availability of ITC Claims on Tours and Travels GST Rate

If a tour operator charges GST at the rate of 18% on the total amount, they will be eligible to claim ITC on various services such as rent, professional fees, lease lines, telephone, etc.

Here is a more detailed explanation of ITC availability with regards to the GST rate for tours and travels:

- Air travel agents can claim ITC on the GST paid for commission or service charges.

- Inbound tour fees charged on a commission basis are subject to 18% GST with ITC.

- ITC can be claimed if the service is outsourced from another agent.

- Hotels charging a commission will have 18% GST applicable, and ITC can be claimed.

- All other renting services are charged at 18% GST, with IT

Q: Can air travel agents avail of ITC?

A: Yes, air travel agencies are eligible for ITC on the GST they paid on the commission they received from passengers or travelers.

Q: Is GST applicable to cab service providers like Ola, Uber, etc.?

A: Yes. According to section 9(5) of the CGST Act, all cab service companies are required to pay GST.

Q: Is a tour operator taxable?

A: Tour operators are considered 'people', but the brokerage charged by them is taxable.

Q: How much GST is there on a flight ticket?

A: The GST on economy flight tickets is 5%, whereas for business and premium economy, it is 12%.

Available on both IOS and Android. Try Pluto Money Today 👇

Install Now

Follow us on

Have a question.

Digital Gold

Invest in 24K Gold with Zero Making Charges.

Digital Silver

Invest in silver with Zero Making Charges.

Newly Launched 🥳

Pluto Fixed

Earn from 11% to 14% Returns annually in a fixed lock-in period.

Share with your friends

Help you friends in learning more about personal finance by share this blog.

Help you friends in learning

more about personal finance

by share this blog.

Help you friends in learning more about personal

finance by share this blog.

Silimar Blogs

Axis Bank Credit Card Net Banking

August 5, 2024

PNB Fixed Deposit (FD) Interest Rates

Linking Aadhaar to Your Punjab National Bank Account

PNB SIP Calculator

How to Close a PNB Account Online & Offline?

TDS Refund - How to Claim TDS Refund

Download App

Explore More

Managing assets totalling over 1 crore+

• +91 97272 59636
• [email protected]

• Virtual CFO
• Risk based Internal Audit
• SOP Process Audit and Validation
• Due Diligence Review
• Fraud Prevention & Forensic Audit and Investigation
• Government Incentives/Benefits/Subsidies
• Startup Support Services
• Indirect Tax
• International Taxation
• Audit & Assurance
• Digital Economy
• Ai Extensive
• Knowledge Update
• Tours and Travels: HSN Code and GST Rate on Travel Agents Services

The Goods and Services Tax (GST) in India significantly impacts the tours and travel industry. Therefore, tour operators and travel agents must navigate distinct GST rates based on the availability of input tax credits (ITC) to ensure compliance and optimize their pricing strategies.

Scope of Taxation on Tours and Travels

GST regulations provide three operational methods for tour operators regarding ITC claims:

• Tour Operator with No ITC : Charges 5% GST on the total package but does not claim any ITC.
• Tour Operator Claiming ITC : Charges 18% GST on the total package and claims ITC, adhering to the place of supply rule.
• Pure Agent : Acts as an intermediary, charging 18% GST on invoices. The operator separately mentions and reimburses actual service expenses (e.g., travel, hotel) to the customer, with proper record maintenance.

Value of Supply for GST on Tours and Travels

Tour operators acting as pure agents can exclude the expenses incurred by the service provider from the value of their supply. Consequently, this exclusion ensures that GST is levied only on the actual service provided, leading to a more accurate tax liability calculation.

Time of Supply for GST on Tours and Travels

The time of supply varies based on the operational role of the tour operator:

• Not Acting as a Pure Agent : The operator charges and pays GST at the time of payment or invoice issuance, whichever is earlier. Moreover, the operator recognizes revenue on a payment basis.
• Acting as a Pure Agent : The operator charges GST when raising the final invoice or when receiving the commission, whichever occurs earlier.

Place of Supply for GST on Tours and Travels

The place of supply rules are crucial for ITC claims:

• Hotel Reservations : The place of supply is the hotel’s location. Thus, the operator cannot claim GST included in the invoice as ITC if not registered in that location.
• Flight Tickets : The place of supply is the flight departure location. Therefore, the operator cannot claim ITC if not registered in the departure state.

GST on Tours and Travels with HSN Code

Under Heading 9985 of the GST Tariff Act, the GST rate for tours and travel services is typically 5%, subject to specific conditions. Here’s a detailed breakdown of SAC codes and corresponding GST rates:

Availability of ITC Claims on Tours and Travels GST Rate

Charging 18% GST allows tour operators to claim ITC on various expenses, thereby enhancing their financial efficiency. Key points on ITC claims include:

• Air Travel Agents : They can claim ITC on GST paid for commission or service charges.
• Inbound Tour Fees : These fees are subject to 18% GST with ITC.
• Outsourced Services : ITC can be claimed if services are from another agent.
• Hotel Commissions : 18% GST is applicable with ITC claims.
• Other Renting Services : These are charged at 18% GST with ITC availability.

Understanding these regulations helps tour operators make informed decisions about their service pricing and tax obligations, ensuring compliance and optimal financial management.

LinkedIn Link :  RMPS Profile

This article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event,  RMPS & Co.  or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc if any.

WhatsApp us

•  Home  
•  G S T 
• Exp. / Imp.
• Corporate Laws
• Indian Laws
•  About 

GST ON CONVEYANCE CHARGES

Whether GST is applicable on conveyance charges under RCM.

Posts / Replies

Showing Replies 1 to 5 of 5 Records

If it is a GTA, then RCM is applicable. GTA is defined.

Conveying charges is not GTA. It is like travelling allowance. Not taxable under GST. No question of RCM. However, as expense may be part of transaction value.

Yes I agree with Sethi sir view

In case the conveyance expenses like auto fare expenses is claim by the employees, then RCM is applicable? If yes then what is the tax rate?

Thanks in advance.

• Auto, metered cab charges - Exempted under GST. No GST shall be paid even if the amount is incurred by employees and later on reimbursed.
• Cab service procured from operator (OLA, UBER etc. ,) - GST will be paid by the such operator itself. There is no liability on the service receiver. Further, the taxes paid by the operator cannot be availed as credit.
• Cab services procured from other agencies - GST will be paid by the provider itself if they are registered, if not service receiver shall pay GST on the same as a service receiver. The taxes paid is not available as credit.
• Local bus charges - Stage carriage is exempted under GST. No GST shall be paid even if the amount is incurred by employees and later on reimbursed.

Old Query - New Comments are closed.

Quick updates:.

• Income Tax Act, 1961
• Income Tax Rules, 1962
• Income Declaration Scheme 2016
• Circulars & Clarifications on Income Declaration Scheme
• Black Money ..... Act, 2015
• Black Money ..... Rules, 2015
• Black Money ..... Notified Dates
• Notifications
• All - Circulars & Instructions
• Instructions
• Compute Income Tax
• IT Rates - Ready Reckoner
• Income Tax Case Laws
• Supreme Court
• Advance Ruling Authority AAR
• Tribunal - ITAT
• Case Laws - Section Wise
• Landmark Cases
• All Acts & Rules
• Chapter V - Finance Act, 1994
• Service Tax Rules, 1994
• Valuation Rules
• ST Dispute Resolution
• Cenvat Credit Rules, 2004
• All Notifications
• Effective Notifications
• Mega Exemption
• Reverse Charge
• Negative list
• Exemption upto Rs. 10 Lacs
• Service Tax - All Manuals
• Abatement, Composition, Specified Valuation
• Declared Services
• Exempted Services
• Service Tax - Ready Reckoner
• Cenvat Credit - R. Reckoner
• Taxation of Services Ed. Guide
• CBEC's Audit Manual
• Taxable Services upto 30.6.12
• Tribunal - CESTAT
• Central Govt. - Revision
• Central Excise Act, 1944
• Central Excise Tariff - CETA
• MRP Based Valuation
• CENVAT Credit Rules, 2017
• Tariff / Basic Rate of Duty / Classification
• Second Schedule
• Third Schedule
• Other Schedules
• MRP - Rate of Abatement
• Tariff - Effective Notifications
• Category Wise Tariff Ntfs
• Non Tariff - Effective Ntfs
• All Manuals
• Central Excise Manual
• CBEC's Excise Manual
• 100% EOU Scheme
• Compounding of Offences
• E-payment of Indirect Taxes
• Settlement Commission
• Customs Act, 1962
• Customs Tariff Act, 1975 -CTA
• All Regulations
• Baggage Rules
• Duties Drawback Rules, 2017
• Import - Valuation
• Export - Valuation
• Old Provisions
• Import Tariff / Basic Rate of Duty / Classification
• Second Schedule - Export Tariff
• Duty Drawback Rates
• Tariff Notifications - Effective
• Anti Dumping Duty
• Safeguard Duty
• All Circulars
• Order-Instruction
• Trade Notices
• Customs Board's Manual
• Acts / Rules / Policy
• Foreign Trade (D&R) Act 1992
• FT (Regulation) Rules 1993
• FT Rules & Orders
• FTP - Policy, 2023
• FTP - Procedures, 2023
• Old Policy and Procedures
• ITC HSN Code - Import Policy
• General Notes / Appendix
• Export Policy - Schedule 2
• SION -Std Input Output Norms
• FTP Appendix
• Public Notices
• Policy Circulars
• Case Laws - Customs
• SEZ Act, 2005
• SEZ Rules, 2006
• SEZ - Act & Rules
• FEMA Act, 1999
• FC (Regulation) Act, 2010
• FEMA Regulations
• FEMA Scheme
• FEMA Directions
• Old Rules and Regulationis
• Master - Circulars
• Master - Directions
• FDI Guidelines
• Central Sales Tax Act, 1956
• CST (Registration And Turnover) Rules, 1957
• Companies Act, 2013
• Regulations
• Companies Act, 1956
• Income Computation & Disclosure Standard (ICDS)
• Indian Accounting Standards (Ind AS) - 2015
• Accounting Standards - 2021
• Accounting Standards - 2006
• Secretarial Standards
• Cost Accounting Standards
• Cost Audit & Assurance Standards
• Co. Law Committee - Report
• Proposed Amendments in Act
• Proposed Amendments in Rules
• Company Law Board
• Limited Liability Partnership Act, 2008
• Provisions of Companies Act, 1956 applicable to LLP
• Limited Liability Partnership Rules, 2009
• LLP (Winding up and Dissolution) Rules, 2012
• LLP Notifications
• LLP Circulars
• Partnership Firm Act, 1932
• Trusts and Societies
• Constitution of India
• Bharatiya Nyaya
• Union Budget 2024
• Finance Acts / Taxation Acts
• Amendment Acts
• Bills / Finance Bills
• Circulars / Notices
• PMLA - Acts & Rules
• PMLA Notifications
• PMLA Case Laws
• Benami Property - Act
• Benami Property - Rules
• Case Laws - Benami Property
• SGST - State Acts
• SGST - State Notifications
• SGST - State Circulars
• GST Case Laws
• GST - Advance Rulings
• GST - Rate of Tax + Exemptions
• GST - Item wise list
• GST - Schedules to the CGST Act
• GST - FAQs + Manual
• IGST - Effective Ntfs.
• IGST Rate - Effective Ntfs.
• CGST - Effective Ntfs.
• CGST Rate - Effective Ntfs.
• UTGST - Effective Ntfs.
• UTGST Rate - Effective Ntfs.
• Cess - Effective Ntfs.
• Cess Rate - Effective Ntfs.
• Classification - Services - SAC
• Classification - Goods (CTA)
• GST Council Decisions
• GST - Articles
• GST - Discussion
• Constitution Amendment Act, 2016
• DVAT - Acts & Rules
• DVAT Notifications
• Wealth Tax - Acts & Rules
• Wealth Tax Forms
• WT Law & Manual
• Wealth Tax - Case Laws
• Rules, Regulations (DT)
• Income computation & disclosure standards
• Black Money .... Act, 2015
• Black Money .... Rules, 2015
• Income Declaration Scheme
• Acts, Rules & Regulations
• CE Tariff/ Rate/ Classification
• Central Excise Manuals
• Central Excise Case Laws
• Service Tax - Acts & Rules
• Service Tax Notifications
• Service Tax - Manuals
• Service Tax Case Laws
• Case Laws - All States
• Central GST Act, 2017 (CGST)
• Central GST Rules, 2017 (CGST)
• Settlement of funds Rules, 2017
• CGST Notifications
• CGST (Rate) Notifications
• CGST - Effective Notifications
• CGST (Rate) - Effective Notifications
• GST - Circulars
• GST - Forms
• Integrated GST Act, 2017
• IGST Rules, 2017
• IGST Notifications
• IGST (Rate) Notifications
• IGST - Effective Notifications
• IGST (Rate) - Effective Notifications
• GST Compensation Act, 2017
• Compensation Cess Rules, 2017
• Cess Notifications
• Cess (Rate) Notifications
• Cess - Effective Notifications
• Cess (Rate) - Effective Notifications
• UT GST Act, 2017
• UT GST Rules
• UT GST Notifications
• UT GST (Rate) Notifications
• UTGST - Effective Notifications
• UTGST (Rate) - Effective Notifications
• GST - Supreme Court
• GST - High Court
• GST - Advance Rulings / AAR
• Appellate Advance Ruling / AAAR
• GST - Effective Notifications
• Cus Rules & Regulations
• Cus Tariff/ Rate/ Classification
• Customs Case Laws
• Foreign Trade - Acts & Rules
• FTP Policy and Procedures
• ITC HSN Code / Policy
• Acts - SEBI
• Rules - SEBI
• Regulations - SEBI
• Order - SEBI
• Guidelines - SEBI
• Master Circulars
• Insolvency and Bankruptcy Code, 2016
• Circulars / Clarifications
• FEMA - Rules & Regulations
• FEMA Circulars & Guidelines
• FEMA Case Laws
• Finance Acts
• Finance Bills
• Advanced Search
• Data Bank / Database
• Discussion Forum
• What is New
• Recent Case Laws
• Latest Notifications
• Media Gallery
• Short Notes
• Online - Tax / Returns
• Some Useful Sites
• Acts/ Rules/ Regulations
• Circulars/ Public Notices
• Classification / Tax Rate
• Highlights / Quick Notes
• Experts - Forum
• Experts - Authors
• Why to choose TMI?
• Free Services
• Demo Options
• Daily Newsletters
• Feedback / Suggestions
• Terms and Conditions
• Refer to your friend

• Submit Post
• Budget 2024
• Goods and Services Tax

GST on Reimbursement of expenses by Supplier

With the globalization of businesses being on the rise, there has been an equivalent rise in the complexity of transactions.  The management for the smooth conduct of their business receives various goods and services from different suppliers. However, suppliers, sometimes for the sake of convenience, provide additional goods and services to their intended customers/ recipients and later on, recompensed by the supplier for the same. The question now arises is whether GST is payable on such provision of goods or services provided by the supplier. In this regard, section 15 of the Central Goods and Services Act (CGST), 2017 provides that the value of a supply of goods and/or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. Further, clause(c) of subsection 2 of section 15 provides for incidental expenses , including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. Thus, any goods or service provided by the supplier, for which consideration is charged from the recipient shall be included in the transaction value and thus would be chargeable to tax. However, at the same time Rule 33 of CGST Rules probates the inclusion of the expenditure incurred by the supplier of service as a pure agent. From the skim view, the two provisions might seem contradictory to each other. However, an analysis of the same from the service tax era to GST era would help us to mark the differentiation.

Under service tax regime, with the Finance Act, 2015 section 67 was amended so as to include reimbursement of expenses in and as consideration. The amendment had been specifically provided that consideration for taxable service shall include all reimbursable expenditure or cost incurred and charged by the service provider.

At this juncture, it is pertinent to understand that globally there are three methods of calculation of indirect taxes viz. Specific duty, ad valorem tax, and value-added tax (VAT). GST uses the method of value-added tax calculation which removes the cascading effect. GST is calculated on “value-added” and not the value of the goods or services. Value addition is the value added to the raw materials and other things purchased by the producer which means that the cost of purchase inputs would be excluded. Thus, the intent of GST is to tax the value addition. This value addition, on which tax is to be levied is calculated as per section 15 of CGST Act, 2017 read with the relevant rules. Whether reimbursement of expenses by the supplier would be covered by this rule or will fall under the dominion of section 15(2) (c) shall be required to find.

However, rule 33 probates only those supplies which are provided by the pure agent. In trade parlance, the person who acts on behalf of someone can be termed an Agent. The definition of pure agent has been given under rule 33 of CGST Rules, 2017.

Explanation – For the purposes of this rule, the expression “pure agent” means a person who

1. enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

2. neither intends to hold nor holds any title to the goods or services or both so procured or supplied as a pure agent of the recipient of supply;

3. does not use for his own interest such goods or services so procured and

4. receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account

Therefore, only those suppliers who supply the services only in addition to their own supply of goods or services shall be considered as pure agents. Further, the provision of such service should be only for the sake of convenience of the recipient and not with any profit motive. For example – Advertisement charges to the newspaper/ magazine are paid by the advertising agency on behalf of the customer and recovered separately along with their charges for proving the content of the advertisement. Further, the rule also specifies the conditions which are required to be fulfilled if the services provided are to be considered as pure agent services. These conditions are enumerated below:

• the supplier acts as a pure agent of the recipient of the supply when he makes the payment to the third party on authorization by such recipient;
• the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and
• the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Thus, this rule covers only those expenses which are separately authorized by the person on whose behalf such payment is made and such supply is in addition to services already provided by the supplier. Once it has been established what kind of conditions a pure agency has to fulfill, the next query that needs to be answered is whether the reimbursement of any and every expense shall fall within the realm of Rule 33 and thus should be excluded for GST. To answer this, attention should be made to the meaning of reimbursement. The CGST Act has not been defined the word reimbursement. However, the Black’s Law Dictionary defines it as “To pay back; to make return or restoration of an equivalent for something paid, expended or lost; to indemnify or make whole”. Further, a fair understanding can be made from the Bangalore Tribunal, in the case of Bovis Lend Lease (I) P Ltd vs ITO [ITA 636,637 & 665/Bang/2008], wherein, the hon’ble tribunal noted that the following parameters are essential for a payment to be regarded as reimbursement:

The actual liability to pay should be of the person who reimburses the money to the original payer.

• The liability should be clearly determined. It should not be an approximate or varying amount.
• The liability should have crystallised. In other words, the reason given that payments that were never required but were made just to avoid a potential problem may not qualify.
• There should be a clear ascertainable relationship between the paying and reimbursing parties. Therefore, alleged reimbursement by an unconnected person may not qualify.
• The payment should first be made by somebody whose liability it never was and the repayment should then be made to that person to square off the account.

Thus, from the above-held parameters, it can be safely construed that only such clearly ascertainable payments which are made by the supplier on behalf of the recipient and later on recovered by him from the recipient shall constitute the reimbursements. Thus, reimbursement clearly falls within the purview of rule 33 and therefore, reimbursements received by the supplier in capacity of pure agent should not be included in the value of taxable supplies.

To establish that the conditions of pure agent are getting satisfied, it is recommended that there should be a written contract between the supplier and the recipient. The terms and clauses of the contract should clearly point to all the conditions as discussed above with regard to pure agent. This will act as the most reasonable defence if any questions are raised by the Department later on. Further, in order to claim any amount as a deduction in the form of a pure agent, the dealer will have to demonstrate with substantial evidence that the liability to incur the cost was on the recipient and the dealer has incurred such cost merely for convenience’s sake. Furthermore, it is advisable that when the invoice is issued, services provided as pure agent should be distinctly provided in the invoice, even though GST on same is not applicable. The SAC Code for the same should be 9997 which provides for the other services (washing, cleaning and dyeing services; beauty and physical well-being services; and other miscellaneous services including services nowhere else classified).

• Goods And Services Tax
• « Previous Article
• Next Article »

Name: Neha Jain

Qualification: ll.b / advocate, company: n/a, location: new delhi, delhi, india, member since: 01 jun 2021 | total posts: 2, my published posts, join taxguru’s network for latest updates on income tax, gst, company law, corporate laws and other related subjects..

• Join Our whatsApp Group
• Join Our Telegram Group

Leave a Comment

Your email address will not be published. Required fields are marked *

Post Comment

Subscribe to Our Daily Newsletter

Latest posts, omission of din in company’s financial statements: mca imposes ₹5 lakh penalty, interest & late fee for non-compliance under various acts, being compensatory, are allowable, rejection of appeal for non-payment of advance tax without return of income is invalid, advisory on taxation for startups, aifs and ifscs, no confiscation under sec 130 for excess stock found during inspection: allahabad hc, aadhaar authentication approved for two insurance firms, india’s environmental laws and sustainable development, faqs on interest under section 234a, 234b, 234c and 234d, itat condones delay due to lockdown, remands case to cit(a) for decision on merits, comparative analysis of corporate governance in economies, featured posts, live course on grow your idt practice & preparation for gstat (gst tribunal), join 5-day live & online income tax audit course with practical examples, live course: handling faceless income tax assessment with ai tools like chatgpt, non-appointment of company secretary costed company rs. 63.52 lakh penalty, allahabad hc upholds gst penalty on bogus transactions, rupees 43 trillion income tax demands to make india richer and indians poor, cs professional & executive programme exam results on 25th august, 2024, faqs on income tax e-verification scheme 2021, recent clarification on income tax clearance certificate for all travelling abroad, an open letter against forced esi registration & unjust compliance, popular posts, due date compliance calendar august 2024, list of resolution required to be filed with roc in form mgt-14, empanelment for concurrent and stock audit with indian bank, everything about directors report under companies act, 2013, form gstr 1 & gstr-1a- monthly statement of outward supplies | faqs, statutory registers under companies act 2013, august, 2024 tax compliance tracker: income tax & gst deadlines, conversion of public limited company into private limited company, empanelment with bank of maharashtra for concurrent/revenue audit (last date 14.08.2024), section 44ab vs 44ad – presumptive taxation (with examples).

AI Summary to Minimize your effort

GST on Reimbursement of Expenses to a Supplier

Updated on : Jan 12th, 2022

Reimbursement of expenses takes place when a supplier incurs expenditure on behalf of the recipient of supplies. This article discusses the reimbursement of costs to a supplier and the impact of Goods and Services Tax (GST).

What does reimbursement of expenses mean?

Reimbursement of expenses refers to the repayment of money spent by a person. In business transactions, this usually happens when a supplier incurs expenditure on behalf of the recipient who is supposed to incur the said expenditure.

There are two types of expenses that may get reimbursed to the supplier under GST:

• Incidental expenses incurred by the supplier in the course of supply. This could be in the form of commission, packing, travelling expenses, etc., and form a part of the supply value. These expenses are usually incurred before or at the time of delivery of the goods or supply of the services.
• Expenses that the supplier incurs as a pure agent. These are expenses that the supplier has incurred on behalf of the recipient but do not form a part of the supply value. Examples include registration fees or taxes paid to the government, transportation charges paid to a third-party transporter that the recipient has authorised the supplier to incur, etc. 

The following section explains the pure agent concept under GST in detail.

Who is a pure agent under GST?

Under GST, a pure agent refers to a supplier who makes a supply to a recipient and incurs expenditure on some other related supply on behalf of the recipient for which they claim a reimbursement. The reimbursement sought by the supplier is at the actual cost incurred, and no value is added to the original value of the supply made by the supplier. 

The relationship between the supplier and the recipient for the main supply made is that of a principal to principal basis. On the other hand, the relationship between the supplier and the recipient for the ancillary supply made is that of a pure agent. 

Rule 33 of the Central Goods and Services Tax Rules explains the concept of a pure agent as follows. A pure agent is a person who-

• Agrees with the recipient of supply as their pure agent to incur expenditure during the supply of goods or services or both.
• Does not hold nor intend to hold any title to the goods or services or both that have been procured or provided as a pure agent of the recipient of the supply. 
• Does not use such goods or services procured for his interest.
• Receives just the actual amount incurred to procure such goods or services, besides the amount received for the supply provided on the supplier’s account.

Examples of a pure agent under GST

Example 1: X, a Chartered Accountant, collects Rs.1,00,000 from their client ABC Ltd. as professional fees for services rendered for the financial year 2020-21. In addition to this, X also collects Rs.45,000 as a reimbursement for income tax paid to the government on behalf of ABC Ltd. While the first amount of Rs.1,00,000 collected is on a principal to principal basis, the second amount of Rs.45,000 is collected from the client as a pure agent.

Example 2: Y is an importer, and Z is a customs broker. Z takes on the task of customs clearance on behalf of Y in respect of an import consignment. This customs clearance work also required the services of a transporter, for which Y has authorised Z to hire the transporter and make the payment on their behalf. Hence, the services of customs clearance provided by Z are on a principal to principal basis. The transportation services, on the other hand, which was procured by Z and reimbursed by Y, is on a pure agent basis.

What is the impact of GST on reimbursement of expenses? 

All reimbursements of expenses shall form a part of the value of supply, except when incurred as a pure agent. To break this down-

Section 15 of the CGST Act provides that the value of a supply of goods or services or both shall be the transaction value. This is the price paid or payable for the supply of these goods or services and applies where the supplier and the recipient are not related, and the price is the sole consideration for the supply.

Section 15(2) clause (c) states that any incidental expenses charged by the supplier to the recipient and any other amount charged for anything done during the supply until the time of delivery of the goods or supply of the services shall be included in the value of the supply. Hence, any goods or services provided by the supplier, for which a consideration is charged from the recipient, shall be included in the transaction value and chargeable to tax.

With regard to reimbursement of expenses incurred as a pure agent, Rule 33 of the CGST valuation rules provides that any expenditure incurred as a pure agent will be excluded from the value of supply, and hence, from the aggregate turnover as well. However, the supplier will need to satisfy the following conditions for the exclusion from the value of supply: 

• The supplier acts as a pure agent of the recipient when he makes a payment to a third party after authorisation by such recipient.
• The payment that the pure agent made on behalf of the recipient is indicated separately on the invoice issued by the pure agent to the recipient. 
• The supplies procured by the pure agent from the third party are in addition to the supplier supplies’ services on his account.

If these conditions are not satisfied, then such expenditure incurred will be included in the value of supply under GST.

About the Author

Athena Rebello

A Chartered Accountant by profession and a writer by passion, my expertise extends to creating insightful content on topics such as GST, accounts payable, and invoice discounting.. Read more

Quick Summary

Was this summary helpful.

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company Policy Terms of use

Data Center

SSL Certified Site

128-bit encryption