2021 (10) TMI 625 - AAR - GST

Valuation - inclusion of amount reimbursed by the client - amount of wages / salaries, EPF/ ESI etc. - HELD THAT - The applicant is not a pure agent under GST Law. Further the deductions available under Section 15 of the CGST Act do not include the amounts pertaining to EPF, ESI, Salary, or Wages. Therefore entire amount received from the Hospital are exigible to CGST / SGST Act 2017. The applicant is liable to tax on all the amounts received from the Hospital.

Summary

Issues involved:
1. Interpretation of GST Act provisions regarding the tax liability on reimbursed amounts like wages, salaries, EPF, and ESI.

Analysis:
1. The applicant sought an advance ruling on whether they are liable to pay tax on amounts reimbursed by the client for wages, salaries, EPF, and ESI. The applicant contended that as they pass on these amounts to employees and charge commission, they should be considered pure agents, and only the commission should be taxable.

2. During the personal hearing, the applicant reiterated their position, emphasizing that they act as pure agents by passing on the reimbursed amounts to employees and charging a commission. They sought clarification on the taxability of the total amounts received from the client.

3. The Authority discussed the applicant's contentions and findings, noting that the case law cited by the applicant pertained to service tax valuation rules under the pre-GST regime. The Authority highlighted that deductions under Section 15 of the CGST Act do not include amounts related to EPF, ESI, salaries, or wages. Therefore, the entire amount received from the client was held to be taxable under the CGST/SGST Act.

4. Consequently, the Authority issued an advance ruling stating that the applicant is liable to tax on all amounts received from the client, including wages, salaries, EPF, and ESI reimbursements. The ruling clarified the tax liability of the applicant on the reimbursed amounts, emphasizing that these amounts are exigible to CGST/SGST Act 2017.