Pure Agent Under GST: When Reimbursements Are Tax-Free

By SCORE Editorial Team · Prepared by SCORE’s audit, tax and advisory practice · Law stated as on 21 September 2026

Quick answer: A pure agent under GST pays a third party on the customer’s behalf and recovers only the actual cost. Under Rule 33 of the CGST Rules, such recoveries stay outside taxable value. All conditions must be met: a contract, no title or own use, no mark-up and a separate invoice line. Otherwise, Section 15 adds the reimbursement to taxable value.

Are reimbursements taxable under GST?

Usually, yes. GST does not care what you call a recovery. It asks whether the amount is part of the consideration for your supply.

Section 15 of the CGST Act sets the value of a supply. The starting point is the transaction value, which is the price actually paid. Section 15(2) then adds several items to it, even if you bill them separately.

Section 15(2) clause	What it adds to taxable value
15(2)(a)	Taxes, duties, cesses and fees under other laws, except GST itself
15(2)(b)	Amounts the supplier owed but the customer paid, if not in the price
15(2)(c)	Incidental expenses, including commission and packing, charged to the customer
15(2)(d)	Interest, late fee or penalty for delayed payment
15(2)(e)	Subsidies directly linked to price, except government subsidies

Clause (c) catches most “reimbursements”. Travel, courier, printing and phone costs that you incur to deliver your own service are incidental expenses. They carry GST at the rate of your main service.

The one route out is Rule 33. If you act as a pure agent, the amount is a disbursement and not part of your value.

Who is a pure agent under GST?

The Explanation to Rule 33 defines a pure agent. You must satisfy all four limbs:

1. You enter into a contractual agreement with the customer to act as its pure agent for these costs.
2. You neither intend to hold nor hold title to the goods or services you procure.
3. You do not use those goods or services for your own interest.
4. You receive only the actual amount incurred, on top of the fee for your own supply.

Being a pure agent is not enough by itself. Rule 33 also sets three conditions for the exclusion to apply.

What are the Rule 33 conditions for excluding reimbursements?

#	Condition	What it means in practice
1	You pay the third party as pure agent of the customer, on its authorisation	Get the customer’s approval before you incur the cost
2	The amount is separately indicated in your invoice	Show it on its own line, outside taxable value
3	The goods or services are in addition to your own supply	The cost is not an input you consume to deliver your service

These conditions are cumulative. Miss one, and the whole recovery falls back into Section 15. It is then taxed at your main service rate.

What is the official Rule 33 example?

Rule 33 has one illustration. A corporate services firm handles the legal work to incorporate Company B. Besides its fees, it recovers the registration and name approval fees it paid to the Registrar of Companies.

Those fees are compulsory payments for Company B’s incorporation. The firm is merely acting as a pure agent. So the recovery is a disbursement, and GST applies only to the firm’s own fees.

Which expenses usually qualify as pure agent costs?

The table below shows common cases. Treat it as a starting point. The answer always turns on your contract and facts.

Expense recovered	Usually pure agent?	Why
ROC or government fees paid by a consultant for a client’s filing	Yes	Statutory dues of the client, paid on its behalf at cost
Customs duty paid by a customs broker for the importer	Yes	The duty is the importer’s liability, not the broker’s
Electricity recovered by a landlord at the DISCOM rate	Can be	CBIC Circular 206/18/2023-GST accepts it if billed at actuals and not part of a composite supply
Airport fees (PSF/UDF) collected by airlines	Yes	CBIC Circular 115/34/2019-GST treats the airline as a pure agent
Travel and hotel costs of your own staff	No	Used to deliver your own service; incidental expense
Courier or printing charged with a mark-up	No	Not recovered at actual cost
Rent for premises you occupy, recovered from a client	No	You use the premises for your own interest
Third-party costs billed without a separate invoice line	No	Fails the separate indication condition

Notice the pattern. Statutory fees and the customer’s own liabilities pass the test easily. Costs that help you perform your service rarely do.

How should you invoice pure agent reimbursements?

There is no separate “reimbursement invoice” under GST. Use your tax invoice and show the pure agent amount on a separate line, outside the taxable value.

Invoicing checklist

• ☐ Add a pure agent clause to the engagement letter or contract.
• ☐ Get the customer’s written authorisation before incurring the cost.
• ☐ Ask the third party to bill the customer by name, where possible.
• ☐ Recover the exact amount paid, with no mark-up or handling fee.
• ☐ Show the amount on its own invoice line, excluded from taxable value.
• ☐ Keep the third-party bill, proof of payment and recovery working.
• ☐ Charge GST on everything else, including your staff’s out-of-pocket costs.
• ☐ Do not claim input tax credit on costs you treat as pure agent costs.

The last point matters. Claiming credit suggests you used the supply for your own business. That weakens the claim that you never held title or used the service.

If you are on e-invoicing, check how your software reports the excluded line. It should not enter the taxable value of the IRN.

Can you add a handling charge and still be a pure agent?

Yes, but bill it separately. A handling or service charge is consideration for your own supply. It attracts GST like your main fee.

Problems start when the charge is mixed into the reimbursement. A rounded-up or marked-up figure fails limb 4 of the definition. The officer may then tax the whole amount.

Why do pure agent claims fail in audits and notices?

Most disputes arise on facts, not law. Common weak points include:

• no contract clause or customer authorisation on record;
• third-party invoices in the supplier’s name, with credit claimed;
• reimbursements lumped into one line with the fee;
• recoveries that do not match the underlying bills;
• costs that were really inputs for the supplier’s own service.

Repair these before an audit. Once a show cause notice arrives, the burden is on you to prove each condition.

Frequently asked questions

Are all reimbursements outside GST?

No. Under Section 15(2)(c), incidental expenses charged to the customer form part of taxable value. Only amounts that meet every Rule 33 pure agent condition are excluded.

Is travel cost recovered from a client taxable under GST?

Usually yes. Travel and hotel costs of your own staff help you deliver your own service. They are incidental expenses and carry GST at your main service rate, even when billed at actuals.

Does a pure agent need to show reimbursements separately on the invoice?

Yes. Rule 33 requires the amount to be separately indicated in the invoice. Show it on its own line, outside the taxable value, and keep the third-party bill as support.

Can a pure agent claim input tax credit on the expenses?

It should not. Claiming credit suggests you used the goods or services in your own business. That conflicts with the pure agent conditions and invites a dispute.

Is reimbursement to employees taxable under GST?

Reimbursing your own employees is not a supply by them. Services by an employee to the employer in the course of employment fall outside GST under Schedule III. Your credit on the underlying bills is a separate question.

What happens if one Rule 33 condition is not met?

The whole recovery is treated as part of the value of your supply. It is then taxed at the rate applicable to your main service, with interest if GST was not paid on time.

How SCORE helps

SCORE’s indirect tax team reviews your contracts, invoice formats and reimbursement ledgers against Section 15 and Rule 33. We fix clauses and invoice layouts before an audit, not after. When a notice questions your pure agent position, we prepare the reply and the evidence trail.

Unsure whether your reimbursements are taxable? Book a GST health-check with SCORE and ask for our invoicing checklist.

Sources

• CBIC tax information portal: Rule 33, CGST Rules (pure agent)
• GST Acts, rules and notifications (CBIC)
• GST Council

This article is general information, not professional advice.