GST payable on Toll Reimbursements: AAR [Read Order]

The Authority for Advance Rulings (AAR), West Bengal has held that the reimbursement of toll charges will attract Goods and Services Tax ( GST ).

The Authority noted that though there is no GST on toll when someone pays the toll and recovers it from a company or dealer as a part of services, such reimbursement will be a part of the value of supply and hence liable to GST.

In the instant case, the applicant Premier Vigilance & Security Pvt Ltd. The company provides security and transportation services to banks for ferrying cash in customized cash vans sought for a ruling on the applicability of GST on the Toll Taxes reimbursed by its clients or the ability to claim it as a deduction under Rule 33 from the value of supply, being expenditure incurred as a pure agent. As per the agreements, the actual toll and parking charges will be paid., but the banks do not authorize it as a ‘pure agent’ or acknowledge toll as their own liability.

AAR observed the applicant, being the owner of the vehicles, is the recipient of the service provisioned tolls. The applicant is the beneficiary and liable to pay the toll.

“The expenses so incurred are, therefore, cost of the service provided to the Banks. Reimbursement of such cost is no disbursement, but merely the recovery of a portion of the value of supply made 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 so that his vehicles can access roads/bridges to provide security services to the recipient,” the AAR said.

It was said that the Toll charges paid are not, therefore, to be excluded from the value of supply under Rule 33. GST shall, therefore, be payable at the applicable rate on the entire value of the supply, including toll charges paid.