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2022 (7) TMI 405 - AUTHORITY FOR ADVANCE RULING, TAMILNADUExemption from GST - intra-state supply of services - Services by way of access to a road or a bridge on payment of toll charges falling under the heading 9967 - inclusion of value of toll charges in the value of outward supply of service - liability to pay tax on the toll charges also by adding to outward value of supply of service - HELD THAT:- The question regarding exemption from GST is not admissible in as much as the applicant is only a recipient of such toll services. To ascertain if the toll charges are to be treated as reimbursement or disbursement as claimed by the applicant, the meaning of the word 'reimbursement' is analysed. In general parlance, the term “reimbursement” refers to the recovery of an expense that a person (the service provider) incurs as a principal from another party. On the other hand, the recovery of a payment made on behalf of the recipient of service by the provider of such service as an agent is termed as a “disbursement”. A disbursement does not constitute a supply and hence, is not subject to GST. A reimbursement, on the other hand, is subject to GST if it is consideration for a supply of goods or services. Here the toll charges are consideration paid for access to a road which is incurred while performing the renting of road vehicles service undertaken by the applicant - the toll charges are incurred by the applicant while performing the agreed supply and is a cost for the applicant. Further for a reimbursement, the relationship between the service provider and recipient needs to be that of mere provider and receiver and not that of an agent. It is established that the applicant has been engaged by their clients only as a service provider of transportation services and not as an Agent. The Applicant, being the service provider of transportation service, is the recipient of the service provisioned on payment of toll. Such charges are costs incurred, so that his vehicles can access roads/bridges to provide transportation services to the recipient. Hence they are the beneficiary and liable to pay the toll, which is compulsorily levied on the vehicles. The expenses so incurred are, therefore, cost of the service provided to their service recipients - the cost of toll charges which are paid by the applicant and later reimbursed by their clients should be included in the value of supply and tax shall, therefore, be payable at the applicable rate on the entire value of the supply, including toll charges paid. Thus, the Applicant is a service provider of transportation services to their clients and the toll charges incurred by them and later reimbursed from the service recipients should be included in the value of supply and tax be paid at the appropriate rates on the entire value of supply.
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