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Case Law Details

Case Name : In re Maansmarine Cargo International LLP (GST AAR Maharashtra)
Appeal Number : NO. GST-ARA- 04/2019-20/B-97
Date of Judgement/Order : 23/08/2019
Related Assessment Year :
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In re Maansmarine Cargo International LLP (GST AAR Maharashtra)

Whether GST is applicable on reimbursement of expenses such as salaries, rent, office expenses, travelling cost etc.?

Applicant is not a pure agent. In the subject case the applicant is making payments to vendors for supply received by them. The applicant is not making payment to the third party for the services rendered by such third party to the recipient of supply, under a contract for supply. In the subject case the recipient of supply is not liable to make payment to third parties and therefore it can be said that the applicant is not making payments on behalf of the recipient of supply. Hence it is seen that conditions mentioned at 1 to 3 above are not fulfilled in the subject case and therefore the applicant is not acting as a pure agent of the recipient of supply.

Further, the applicant has cited CBDT Circular no. 107/26/2019-GST of CBDT dated 18th July, 2019 and have contended that they are providing ITes services as defined in Section 10TA of Income Tax Rules, 1962 to MSS Marine Ltd on their own account. The said Circular is not applicable to GST Laws and therefore we are not discussing the same in this order.

The reimbursement received by the applicant pertains to establishment costs which would be incurred by them for running their office in India. In any normal business such expenses are borne by the supplier of service and it is but natural that they would include such costs in the value to be received from the recipient of their services. In the subject case the said costs, are termed as reimbursements and are recovered in addition to management fees from their clients and therefore it is nothing but additional consideration charged for the supply in this case. The provisions of Section 15 of the CGST Act, which deals with the transaction value are very clear and as per the said provisions the valuation of supply will include all costs, including the employee cost provided by one distinct entity to the other distinct entities.

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