We are a registered private limited company and we are delivering online and doorstep services to our clients.
Our customer base is automobile dealers and we as a brokerage company are providing them the services of their newly sold vehicles registration process.
Basically, there are three types of expenses which we are bearing on behalf of our clients.
a) vehicle tax amount (g.s.t exempted ) which we directly pay to the Govt. of India.
b.) secondly, a certain amount of out of pocket expenses per case which we are supposed to pay only in cash mode and there is no scope of getting g.s.t invoice of these out of pocket expenses. Hence, we won't get any sort of input tax credit to set off further.c.) Lastly, our service charges which should be (inclusive of g.s.t) as we are offering our clients, document handling services and providing them their registration certificates issued by the concerned authority.
Our clients firmly say that they will pay all the three above mentioned parts in online mode only.
Hence, we are facing a dilemma that whether we should impose g.s.t on out of pocket expenses part or not.?
Now, As far as my knowledge is concern If we impose g.s.t on out of pocket expenses part, pays g.s.t to the govt accordingly as well, then all of that amount comes under my gross turnover and my income tax liability occurs on the same.
But that out of expenses amount is not at all a part of income for me, I am not even generating any profit on the same. It's completely an expense which we are bearing on behalf of our client in cash mode and my clients pay me in online mode.
Guide me to assist, how we can book out of pocket expenses amount in our invoices, whether it should be under inclusive of g.s.t slab or exempted g.s.t slab if it is under g.s.t slab then what should be the chargeable rate of g.s.t & SAC Code for the same and if it is under exempted g.s.t slab then what should be the SAC Code for the same.
Last but not least, What should be the tax slab of g.s.t on the type of services which we are offering?
This is a simple case as far as GST and income tax is concerned.
- Registration tax paid on behalf of client is a purely case of working as an agent. If you have a well documented agreement with client, you need not to charge GST on tax paid on their behalf.
- Other out of pocket expenses, you need to charge GST and it should be part of your revenue. As per GST valuation provisions any expense incurred in rendering service should form part of value of supply, so you have to charge GST on other out of pocket expenses as these expenses were necessary to complete your service.
- You need to charge GST on your service fee, your service fee should be mentioned in invoice along with out of pocket expenses, as per above point.
This will have no impact on your income tax liability, though your revenue will increase by out of pocket expense shown in invoice but you will be able to claim expense against these charge.
Let's understand with an example.
Your service fee is 100 + out of pocket expense is 50. Total billing and revenue will be of Rs. 150.
You can claim 50 out of pocket as expense in your IT filing and your net income will remain 100.
Feel free to comment for any further clarification.
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