In the course of business, We land up in situations where we have to claim money from our customers not pertaining to our product/services. A few examples could be:
- Claiming Out of Pocket Expenses
- For Rate Differences
- For Discounts
- For Quantitative/ Qualitative Differences
We cannot raise Invoices for the same, as it does not pertain to the Value of our Goods/Services and also because we dont want to pay taxes twice by raising an Invoice.
In these circumstances, consider raising a Debit Note.
See Format of a Debit Note Below:
Debit note copy
To clarify on the Tax Portion of this:
This is taxable:
- Let”™s take a case where You promise to provide a particular service to a client for a fixed fee of Rs. 10000
- The Service requires you to spend Rs. 1000 on travel, Rs. 3000 on incidentals etc.
- In this case, You cannot escape the ambit of tax by simply indicating these items separately in the Invoice.
This is not taxable:
In case You agree to provide a particular service to the client for a fixed fee, also agreeing to reimburse all Out of Pocket Expenses. you purely avail some services in your capacity as an agent because
- You don”™t consume them for your sake
- You receive purely the amount which I incurred for the sake of the client
- So you don”™t raise an Invoice on this rather a DEBIT NOTE for the same.
So,
- Clearly agree on your Fees + OPE reimbursement with your client beforehand
- Raise a Debit Note for OPE ( Not an Invoice )
You can read more on the taxability aspect here
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