Reimbursements and the pure agent exclusion under Rule 33
The difference between a cost you incurred and a cost you paid on someone else's behalf. The conditions are strict and cumulative.
Rule 33 excludes from the value of a supply the expenditure or costs incurred by a supplier as a pure agent of the recipient, where the supplier acts as a pure agent when making the payment to the third party, the payment is separately indicated in the invoice, and the supplies procured from the third party are in addition to the services supplied on the supplier's own account. Pure agent is defined by four conditions, all of which must be satisfied.
The conditions
The supplier must enter into a contractual agreement with the recipient to act as its pure agent to incur expenditure in the course of supplying the service.
The supplier must neither hold nor intend to hold any title to the goods or services so procured.
The supplier must not use the goods or services so procured for its own interest.
The supplier must receive only the actual amount incurred, without any mark up.
In addition, the payment must be separately indicated in the invoice, and the third party supply must be in addition to the supplier's own service.
Where it works and where it does not
It works for statutory fees paid on a client's behalf — registration fees, court fees, stamp duty — where the client is the person liable and the payment is made in the client's name.
It works for a customs broker paying duty on behalf of an importer, where the duty is the importer's liability.
It does not work where the supplier is itself liable for the cost. Travel, hotel and communication costs incurred by a consultant in performing its own service are the consultant's costs, and recovering them separately does not make them reimbursements.
It does not work where any mark up is charged, however small. A handling charge on a reimbursement destroys the exclusion for the whole amount.
It does not work where the invoice is in the supplier's name and the supplier claims credit, because that is inconsistent with not holding title.
Documenting it
A clause in the engagement agreement appointing the supplier as pure agent for specified categories of expenditure.
Third party invoices in the recipient's name wherever possible, and in any event a record that the recipient was the person liable.
Separate identification in the invoice, at actuals, with no mark up and no credit claimed.
A reimbursement register distinguishing pure agent recoveries from the supplier's own cost recoveries, because the two are frequently mixed in the same invoice line.
What to do on Monday
Add a pure agent clause to engagement agreements for the specific categories it can cover.
Obtain third party invoices in the client's name wherever possible.
Never add a handling charge to a pure agent recovery.
Maintain a reimbursement register separating pure agent recoveries from your own cost recoveries.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Are travel costs recovered from a client reimbursements?
Generally no. They are the supplier's own costs of performing the service and form part of the value under Section 15(2).
Does a small handling charge matter?
Yes. Receiving only the actual amount is a condition, and a mark up defeats the exclusion.
Can we claim credit on a pure agent expense?
No. Claiming credit is inconsistent with not holding title, and it undermines the exclusion.
Must the third party invoice be in the client's name?
It is the strongest evidence. Where it is not possible, establish that the client was the person liable for the payment.
Is stamp duty paid for a client a reimbursement?
Where the client is the person liable and the payment is at actuals under a pure agent arrangement, yes.
In this cluster
- Valuation under Section 15: transaction value and its exceptions
- Rule 28 in practice: related party and distinct person supplies
- Corporate guarantees between group companies: the one percent rule
- Northern Operating Systems: secondment, and the notice that follows every expatriate
- Cross charge of common costs between branches
- Mandatory Input Service Distributor: the compliance rebuild
- Post sale discounts: the agreement requirement and the credit note trail
- Free of cost supplies, warranty replacements and moulds
- Liquidated damages, penalties and notice pay recovery
- Vouchers and gift cards: the amended treatment
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.