Reimbursement of expenses such as salaries, rent, office expenses, travelling cost etc. cannot be termed as those incurred in capacity of pure agent

The reimbursement received by the applicant pertains to establishment costs which would be incurred by them for running their office in India. In any normal business such expenses are borne by the supplier of service and it is but natural that they would include such costs in the value to be received from the recipient of their services. In the subject case the said costs, are termed as reimbursements and are recovered in addition to management fees from their clients and therefore it is nothing but additional consideration charged for the supply in this case. The provisions of Section 15 of the CGST Act, which deals with the transaction value are very clear and as per the said provisions the valuation of supply will include all costs, including the employee cost provided by one distinct entity to the other distinct entities.

In the subject case the recipient of supply is not liable to make payment to third parties and therefore it can be said that the applicant is not making payments on behalf of the recipient of supply. Hence the applicant is not acting as a pure agent of the recipient of supply.

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