To determine whether the recovery of expenses is subject to GST, you must first differentiate whether the recovery is a disbursement or reimbursement.

  • Disbursement:  
    • Recovery of a payment made on behalf of another party by you as an agent
    • It does not constitute a supply and is not subject to GST.
  • Reimbursement: 
    • Recovery of expenses you incur as a principal when you contract directly with vendors to procure goods and services in your own capacity. 
    • It may be subject to GST if it is a consideration for a supply of goods or services.


GST Treatment for Reimbursement

The GST treatment for reimbursement depends on whether:

  1. The recovery of expenses is ancillary to or form inputs to a primary supply of goods or services, or 
  2. The recovery of expenses is a separate recovery for costs of goods and services procured. 


A quick overview is provided below. 

GST Treatment
Recovery of expenses is ancillary to or form inputs to a primary supply Follow that of the primary supply.
Recovery of expenses is separate and not ancillary to or form inputs to a primary supply Recovery at cost or with mark-up
  • Nature of supply will follow that of the goods or services originally procured.
  • However, the GST treatment for the recovery will be assessed on its own, as the supplier and recipient of the services have changed. You are now the supplier and the party you are recovering the expenses from is the recipient of the supply.
  • If there is any mark-up, the GST treatment is based on the separate supply of service (e.g. arranging fees, administrative fees). 

Recovery of exempt supplies 

The recovery would be exempt if it falls within the description of an exempt supply in Part I of the Fourth Schedule to the GST Act.

Check out our e-Tax Guide GST: Guide on Reimbursement and Disbursement of Expenses for more information.


Do I need to charge GST on the recovery of expenses?

Below are some common reimbursement scenarios on the correct GST treatment and errors to avoid.