Reimbursement of toll charges will attract Goods and Services Tax (GST), according to the West Bengal Authority for Advance Rulings (AAR).

While there is no GST on toll, but when someone pays 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, according to an order by West Bengal AAR in the matter involving applicant Premier Vigilance & Security Pvt Ltd. The company provides security and transportation services to banks for ferrying cash in customised cash vans.

Decisions by the AAR help the taxpayers by making an advance decision in relation to the supply of goods and/or services proposed to be undertaken or being undertaken. The decision is binding on the applicant and the jurisdictional tax authority. Though such a decision does not have the precedence value as that of a high court or Supreme Court ruling, it can be used as persuasive tool in future cases.

The applicant sought a ruling on 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. The agreements mention that actual toll and parking charges will be paid.,but the banks do not authorise the 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 are the cost of the services 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 to access roads/bridges to provide security services to the recipient.”

The Authority disallowed the applicant’s contention and concluded that “such reimbursement of toll charges shall be eligible to GST.”

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