Service Tax on Group Companies Billing
This query is : Resolved
05 July 2010
Please let me know that is there any notification/law regarding paying of service tax on group companies at the time of raising the bill (accrual basis) instead of payment basis?
Would be more gratful if you could provide the notification details if any.
Thank You
Please let me know that is there any notification/law regarding paying of service tax on group companies at the time of raising the bill (accrual basis) instead of payment basis?
Would be more gratful if you could provide the notification details if any.
Thank You
06 July 2010
.
24 July 2025
Hi! Regarding **Service Tax on transactions between Group Companies** and the **timing of payment of service tax (accrual vs payment basis)**, here’s the clarity:
---
### 1. **Service Tax Payment Timing - Accrual vs Payment Basis**
* As per the **Finance Act and Service Tax Rules**, the liability to pay service tax arises at the **time of receipt of payment** (cash basis), not on accrual of invoice or billing.
* **Rule 6(1)(a) of the Service Tax Rules, 1994** states that the service tax shall be paid on the **value of taxable services received or provided during a month**, but the timing of payment is generally linked to when consideration is received or paid.
* So, **service tax on intra-group billing is to be paid when payment is actually made, not merely on billing or accrual**.
---
### 2. **Are there any Notifications/Laws for Accrual Basis Payment for Group Companies?**
* There is **no specific Notification or Circular that mandates service tax payment on accrual basis for group companies.**
* The general law applies uniformly to all taxable services, including those rendered between group companies.
* Hence, **service tax is payable on receipt/payment basis as per the general provisions, even in transactions between group companies.**
---
### 3. **If Group Companies want to pay service tax on accrual basis voluntarily**
* They can **opt to do so as a conservative accounting practice**, but it is not mandated by law.
* Some companies do this for internal compliance or accounting uniformity, but legally, the tax liability arises on receipt/payment.
---
### 4. **References**
* **Section 67 of Finance Act, 1994** (Valuation of Taxable Services)
* **Rule 6(1)(a) of Service Tax Rules, 1994** (Payment of Service Tax)
* No special notifications exist for group companies regarding accrual basis.
---
### Summary:
| Aspect | Position |
| ------------------------------- | -------------------------------------------- |
| Service tax liability timing | On payment/receipt, **not on accrual basis** |
| Special notification for groups | **No special notification exists** |
| Can pay on accrual voluntarily | Yes, but not legally required |
---
If you want, I can help locate the exact extracts from the Rules or Circulars or suggest how to reflect this in your accounting system. Would you like that?
---
### 1. **Service Tax Payment Timing - Accrual vs Payment Basis**
* As per the **Finance Act and Service Tax Rules**, the liability to pay service tax arises at the **time of receipt of payment** (cash basis), not on accrual of invoice or billing.
* **Rule 6(1)(a) of the Service Tax Rules, 1994** states that the service tax shall be paid on the **value of taxable services received or provided during a month**, but the timing of payment is generally linked to when consideration is received or paid.
* So, **service tax on intra-group billing is to be paid when payment is actually made, not merely on billing or accrual**.
---
### 2. **Are there any Notifications/Laws for Accrual Basis Payment for Group Companies?**
* There is **no specific Notification or Circular that mandates service tax payment on accrual basis for group companies.**
* The general law applies uniformly to all taxable services, including those rendered between group companies.
* Hence, **service tax is payable on receipt/payment basis as per the general provisions, even in transactions between group companies.**
---
### 3. **If Group Companies want to pay service tax on accrual basis voluntarily**
* They can **opt to do so as a conservative accounting practice**, but it is not mandated by law.
* Some companies do this for internal compliance or accounting uniformity, but legally, the tax liability arises on receipt/payment.
---
### 4. **References**
* **Section 67 of Finance Act, 1994** (Valuation of Taxable Services)
* **Rule 6(1)(a) of Service Tax Rules, 1994** (Payment of Service Tax)
* No special notifications exist for group companies regarding accrual basis.
---
### Summary:
| Aspect | Position |
| ------------------------------- | -------------------------------------------- |
| Service tax liability timing | On payment/receipt, **not on accrual basis** |
| Special notification for groups | **No special notification exists** |
| Can pay on accrual voluntarily | Yes, but not legally required |
---
If you want, I can help locate the exact extracts from the Rules or Circulars or suggest how to reflect this in your accounting system. Would you like that?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- About TDS & Income Tax
- Pass word to open justification report for Q1 for FY 2026-27
- PPF interest-As Exempt Income disclosure
- Section 194JA & JB Income which ITR Form to use
- Scrutiny and reopening of past returns
- Type of Capital Gain
- F & O PROFIT REPORTING FOR AY 2026-27
- Booth for sales promotion
- Difference in GSTR3B system generated which is correct and actual Payment it asks
- GST ON TRAVELLING BILLS
- TDS on Rent received on redevelopment of building
- Tax on Deemed Capital Gain
- Indian IT Portal issue in computing tax as per UK-India DTAA
- Capital Gains on sale of residential flat
- Upload Level ValidationITR3Category of Defect B/D
- PF Taxable Income
- Clarification on Tax Audit Applicability and Reporting of F&O Transactions in ITR-3
- Interest credited in FY2025-2026 & TDS therein by EPFO does not reflect in AIS or Form 26AS
- 44ad eligble money lending interest
- Taxation in the hands of Landowner under JDA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
