A paid on behalf B where the tax invoice address to “B” . Do I need to issue “debit note” or”invoice” or tax invoice from A to B
The recovery of a payment made by registered person on behalf of another party as an agent is termed as a “disbursement”. A disbursement does not constitute a supply and hence, is not subject to GST. Payment to third party or on behalf of the principal will be treated as disbursement if the registered person fulfils all the following criteria:
(a) Incur expenses as an agent acting on behalf of the client;
(b) The client is the recipient of the supply (invoice is in the client’s name);
(c) The client is the person responsible to pay and claim input tax credit;
(d) The payment is authorised by the client;
(e) The client knew that the supply is made by a third party;
(f) The exact amount is claimed from the client and the agent has no right to alter or add on the value of the supply;
(g) The payment is clearly an additional to the supply made to the client.
Company A paid on behalf of Company B (Tax Invoice is in the name of Company B) and Company A recovers the amount from Company B. The recovery by Company A is treated as a disbursement and Company A is not entitled to claim ITC. Company A issue a Tax Invoice and not subject to GST. Do not issue Debit Note.