Example

A taxpayer has entered into an agreement with other person for providing some services . Now as per the agreement the payment terms are Rs. 6000/- per Day + Out of Pocket Expenses incurred by the taxpayer .

Now whether the GST is applicable on Rs. 6000/- or  on Rs. ( 6000+Out of Pocket Expenses )

Answer

As per section-15 of CGST Act, the value of supply shall include incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services.

Therefore GST is charged on Rs (6000+Out of Pocket Expenses).

But If the taxpayer acts as a Pure Agent as per Rule 33 Of CGST Act reproduced below GST will be applicable on Rs 6000/-. the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

    (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;

    (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

    (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.