GST on Toll Charges Reimbursed by Clients
The West Bengal Authority for Advance Ruling decided that reimbursed toll charges are part of the taxable value of security services.
- Ruling
- 20/WBAAR/2018-19 dated 02/11/2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if reimbursed toll charges qualify as pure agent expenses.
- The authority ruled that toll charges are part of the total service value.
- The company is not a pure agent because it owns the vehicles used.
In short
The company asked the West Bengal Authority for Advance Ruling (AAR) if they must pay Goods and Services Tax (GST) on toll charges that their clients reimburse to them. They argued that they were acting as a 'pure agent' for the client, which would allow them to exclude these costs from their taxable income under Rule 33 of the GST Rules.
What has changed
How it worked before
Many businesses assumed that if a client pays them back for a specific expense like a toll, that money is not part of their service fee and therefore not subject to GST.
What has changed
The authority decided that because the company owns the cash vans and uses the roads to perform its own work, the toll is a business cost, not a client expense. This means the company must include the full amount of the toll in its taxable value and pay GST on it. In practice, this increases the total tax burden for service providers who recover toll costs from their clients.
Who this affects
Security agencies, cash transportation firms, and logistics companies that use their own vehicles and charge clients for road tolls.
An example
A logistics firm uses its own trucks to deliver goods for a retail chain. The firm pays tolls and asks the retailer to reimburse them. Based on this ruling, the logistics firm must treat the reimbursed toll as part of its service fee and charge GST on the entire amount, including the toll portion.
What you should do
If you are in a similar business, you should review your contracts and billing practices. Remember that an advance ruling only binds the company that asked for it and its specific tax office; it is not a law that applies to your business automatically. You should consult with your tax advisor to see if your specific contract structure allows for a different interpretation.
If you do nothing
If you assume this ruling applies to you and stop paying GST on reimbursed tolls, you risk a tax audit. If a tax officer disagrees with your interpretation, you may be forced to pay the unpaid tax plus interest and penalties. Relying on a ruling that does not apply to your specific situation can lead to significant financial liability.
The terms explained
- Pure agent
- A person who enters into a contract to act on behalf of another and does not use the goods or services procured for their own benefit.
- Value of supply
- The total amount of money on which GST is calculated for a service or product.
- Advance ruling
- A written decision by tax authorities on how GST laws apply to a specific business question.
The ruling in detail
Authority for Advance Ruling
Premier Vigilance & Security Pvt Ltd
20/WBAAR/2018-19 dated 02/11/2018 · West Bengal
Questions before the authority
- Whether GST is chargeable on Toll Taxes reimbursed by clients or if it can be claimed as a deduction under Rule 33 from the value of supply as expenditure incurred as a pure agent.
Facts
The applicant provides security and cash transportation services to banks using customized cash vans. During these operations, the applicant pays toll charges to NHAI and state authorities, which are subsequently reimbursed by the client banks. The applicant sought a ruling on whether these reimbursed toll charges qualify for exclusion from the value of supply under Rule 33 of the GST Rules.
Ruling
| Question | What the authority ruled |
|---|---|
| Reimbursement of toll charges | Not excludable Must be included in the value of supply for GST purposes |
The authority ruled that toll charges paid by the applicant are not to be excluded from the value of supply. It concluded that the applicant is not acting as a pure agent of the bank when paying these charges, as the applicant is the owner of the vehicles and the primary beneficiary of the road access service.
Reasoning
The authority determined that the applicant fails to meet the criteria for a pure agent under Rule 33 because the banks do not specifically authorize the applicant as a pure agent, nor do they acknowledge the toll as their own liability. The toll is a cost incurred by the applicant to provide its own security services, making it a component of the total value of supply. Consequently, the reimbursement is not a disbursement but a recovery of a portion of the service cost. The ruling relies on the definition of a pure agent and the conditions stipulated in Rule 33 of the GST Rules.
Provisions relied on
- Section 97(2)(e) of the CGST/WBGST Act
- Section 97(2)(g) of the CGST/WBGST Act
- Rule 33 of the GST Rules
- Section 103(2) of the GST Act
- Section 104(1) of the GST Act
For the practitioner
This ruling clarifies that service providers who own the vehicles used for transportation cannot treat reimbursed toll charges as **pure agent disbursements**. It settles that such costs are **integral to the value of supply** and subject to GST. Practitioners should note that this decision emphasizes the necessity of explicit contractual authorization and liability acknowledgment to qualify for Rule 33 exclusions.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/wbaar-20-2018-19_02.11.18-pvspl.pdf
Legibility of the scan, as read: high.
Prepared 21-10-2026.
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