Service Tax on Reimbursement of Expenditure
Posted @ August 25, 2013, 9:26 pm under (Service Tax Updates)
Delhi High Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. of India [(2012) 12-TMI-150 (Del.)] held that the Rule providing service tax on reimbursement is ultra vires the main provisions of the Service Tax law contained in the Chapter V of the Finance Act ,1994, particularly sections 66 , 67 and 94. Court held that imposing Service Tax on reimbursements is not in the scheme of law and such a provision is ultra vires the Act itself. In this judgment, the court held that what is to be taxed is the gross amount charged by the service provider ‘for such service’. The words ‘such service’ are important for taxation. It is only the value of ‘such service’ which can be taxed and nothing else. The value of service, to be taxed, can, therefore, never exceed the gross amount charged by the service provider for such service provided. Thus, there can be no Service Tax on reimbursements as such reimbursements (say, travelling, accommodation etc.) as it would amount to double taxation.