In response to an application filed by Premier Vigilance & Security Pvt Ltd, a company providing transportation and services to banks, the West Bengal Authority for Advance Rulings (AAR) has passed an order saying that Goods and Services Tax (GST) will be levied on reimbursement of toll charges.
GST is not applicable to toll, however, if a person pays the toll tax and recovers the same from his company as a part of services, GST would be levied on it.
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The applicant, Premier Vigilance & Security Pvt Ltd, filed a request asking clarification about GST applicability on the reimbursement of Toll Taxes by its clients or possibility of credit claim on such GST paid. The banks, however, refuse to accept toll reimbursement as their liability as it is not treated as ‘pure agent’.
AAR, in the case, finalized that the applicant is the actual recipient of the services and therefore should be liable to pay the toll. The expenses involved in such services are the pure cost to the banks. “The Applicant is, therefore, not acting in the capacity of a ‘pure agent’ of the Bank while paying toll charges. Such charges are costs incurred to access roads/bridges to provide security services to the recipient.” The AAR rejected the applicant’s plea saying that such reimbursement of charges paid as the toll is liable for GST.
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Tax experts have supported the decision made by the West Bengal AAR. “There is a misconception that reimbursement of expenses without markup is not liable to tax. However, unless all conditions for qualifying as ‘pure agent’ are satisfied, the benefit of non-payment of tax on reimbursements cannot be claimed,” said Harpreet Singh, Partner in KPMG. He added that the decision was right as recovery of the toll is not exempt from GST since the company is not working as a ‘pure agent’ of banks.
