S 43b
This query is : Resolved
28 September 2012
is liability of service tax which is payable as per Reverse Charge (GTA) provisions covered under S.43B? service tax not passed thru profit & loss a/c....
28 September 2012
i thought S.43B is not relevant in the said situation but have seen a contrary view in this site. so pl guide me
SANJAY TALATI
(Expert)
03 October 2012
Excise/ Service Tax, Sales Tax , PF contribution by the employer etc. are covered by Sec. 43 B.
In case of Chemicals and Plastics India Ltd. V. CIT (2003) ITR 193 Madras High Court held that deduction under sec. 43 B is admissible even if not charged to P & L Account.
However, from the facts of your case it seems that you must have Debited the amount of Service Tax on GTA to the Service Tax Receivable A/c and not charged to P& L A/c. Any way 43B is applicable.
In case of Chemicals and Plastics India Ltd. V. CIT (2003) ITR 193 Madras High Court held that deduction under sec. 43 B is admissible even if not charged to P & L Account.
However, from the facts of your case it seems that you must have Debited the amount of Service Tax on GTA to the Service Tax Receivable A/c and not charged to P& L A/c. Any way 43B is applicable.
SANJAY TALATI
(Expert)
03 October 2012
Excise/ Service Tax, Sales Tax , PF contribution by the employer etc. are covered by Sec. 43 B.
In case of Chemicals and Plastics India Ltd. V. CIT (2003) ITR 193 Madras High Court held that deduction under sec. 43 B is admissible even if not charged to P & L Account.
However, from the facts of your case it seems that you must have Debited the amount of Service Tax on GTA to the Service Tax Receivable A/c and not charged to P& L A/c. Any way 43B is applicable.
In case of Chemicals and Plastics India Ltd. V. CIT (2003) ITR 193 Madras High Court held that deduction under sec. 43 B is admissible even if not charged to P & L Account.
However, from the facts of your case it seems that you must have Debited the amount of Service Tax on GTA to the Service Tax Receivable A/c and not charged to P& L A/c. Any way 43B is applicable.
05 October 2012
Mr Sanjay
so in this case auditor shall disallow transport charges for non payment of service tax on reverse charge basis (though ST not debited to p& l a/c)?
so in this case auditor shall disallow transport charges for non payment of service tax on reverse charge basis (though ST not debited to p& l a/c)?
22 July 2025
Good question! Here’s a clear explanation about Section 43B and service tax under reverse charge (like GTA):
Section 43B Income Tax Act (Basics)
It says certain expenses/tax liabilities are allowed as deduction only on actual payment basis, not on accrual.
These include:
Excise duty
Service tax
Sales tax
Employer's contribution to PF, etc.
Is Service Tax Payable under Reverse Charge (GTA) covered under 43B?
Yes. Service tax liability on GTA (Goods Transport Agency) services payable on reverse charge basis is covered under Sec 43B.
The key point: Deduction for such service tax can be claimed only when it is actually paid to the government, irrespective of whether it is passed through P&L or booked under any other account like service tax receivable.
Your specific point:
Service tax not passed thru profit & loss a/c (i.e. debited to service tax receivable a/c) – can deduction be claimed?
The Madras HC ruling in Chemicals and Plastics India Ltd. v CIT held that even if not debited to P&L, the deduction under 43B can be claimed only when the liability is paid.
So non-payment means deduction is disallowed irrespective of accounting treatment.
What about disallowance by auditor for non-payment of service tax on GTA?
Yes, auditor may disallow the transport charges (or corresponding expenses) if service tax liability under reverse charge is not paid timely.
Because the service tax amount becomes part of your cost of service and must be paid for deduction.
Non-payment of ST on reverse charge basis means the associated expense is not fully deductible under 43B.
Summary:
Scenario Deduction under 43B allowed?
Service tax on GTA under reverse charge paid Yes (even if not debited to P&L)
Service tax on GTA under reverse charge not paid No (deduction disallowed, expense partially disallowed)
So, your auditor’s view is correct: If service tax payable under reverse charge is not paid, deduction on transport charges can be disallowed under 43B.
Section 43B Income Tax Act (Basics)
It says certain expenses/tax liabilities are allowed as deduction only on actual payment basis, not on accrual.
These include:
Excise duty
Service tax
Sales tax
Employer's contribution to PF, etc.
Is Service Tax Payable under Reverse Charge (GTA) covered under 43B?
Yes. Service tax liability on GTA (Goods Transport Agency) services payable on reverse charge basis is covered under Sec 43B.
The key point: Deduction for such service tax can be claimed only when it is actually paid to the government, irrespective of whether it is passed through P&L or booked under any other account like service tax receivable.
Your specific point:
Service tax not passed thru profit & loss a/c (i.e. debited to service tax receivable a/c) – can deduction be claimed?
The Madras HC ruling in Chemicals and Plastics India Ltd. v CIT held that even if not debited to P&L, the deduction under 43B can be claimed only when the liability is paid.
So non-payment means deduction is disallowed irrespective of accounting treatment.
What about disallowance by auditor for non-payment of service tax on GTA?
Yes, auditor may disallow the transport charges (or corresponding expenses) if service tax liability under reverse charge is not paid timely.
Because the service tax amount becomes part of your cost of service and must be paid for deduction.
Non-payment of ST on reverse charge basis means the associated expense is not fully deductible under 43B.
Summary:
Scenario Deduction under 43B allowed?
Service tax on GTA under reverse charge paid Yes (even if not debited to P&L)
Service tax on GTA under reverse charge not paid No (deduction disallowed, expense partially disallowed)
So, your auditor’s view is correct: If service tax payable under reverse charge is not paid, deduction on transport charges can be disallowed under 43B.
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