Service tax paid for gta paid by service provider
This query is : Resolved
21 January 2014
Is it OK if GTA takes responsibility of depositing the Service tax which the service receiver has to pay as per 68(2)???
21 January 2014
You have pay service on GTA if applicable on you.
24 July 2025
Great question! Here’s a clear explanation on **Service Tax on GTA (Goods Transport Agency) services and payment liability under Section 68(2):**
---
### Background:
* Under **Section 68(2)** of the Finance Act (service tax law), **service tax on GTA services is payable by the service receiver** (i.e., the person hiring the GTA), not the GTA itself. This is an example of the **reverse charge mechanism (RCM)**.
* So, legally, the liability to pay service tax lies with the **service receiver**.
---
### Your question:
**Can the GTA voluntarily take responsibility and pay the service tax on behalf of the service receiver?**
---
### Answer:
* **Yes, the GTA can voluntarily pay the service tax on behalf of the service receiver,** but this is not the usual practice.
* The law mandates that the **service receiver is liable to pay service tax under reverse charge**, but there is **no prohibition on the service provider (GTA) paying it on behalf of the receiver** if both agree.
* In such cases, the GTA can collect the service tax amount from the receiver as part of the invoice or bear the tax themselves as a business decision.
* However, from a **legal compliance perspective**, the **service receiver remains liable to discharge the service tax** under Section 68(2). The GTA’s payment is more like a convenience or arrangement between parties.
---
### Important Points:
* **Service receiver must disclose and account for the service tax liability** in their service tax returns even if GTA pays it on their behalf.
* If GTA pays service tax on behalf of the receiver without recovering from them, it becomes the GTA’s expense.
* Both parties should maintain proper documentation for audit purposes.
---
### Summary:
| Aspect | Position |
| --------------------------------- | ----------------------------------------------------- |
| Liability to pay service tax | Legally on the service receiver (Section 68(2)) |
| Can GTA pay on receiver’s behalf? | Yes, voluntarily possible but not mandatory |
| Impact on service receiver | Must account for tax liability in returns |
| Impact on GTA | If paying without recovery, tax paid is their expense |
---
If you want, I can help draft a sample agreement or invoice wording for such arrangements. Would that help?
---
### Background:
* Under **Section 68(2)** of the Finance Act (service tax law), **service tax on GTA services is payable by the service receiver** (i.e., the person hiring the GTA), not the GTA itself. This is an example of the **reverse charge mechanism (RCM)**.
* So, legally, the liability to pay service tax lies with the **service receiver**.
---
### Your question:
**Can the GTA voluntarily take responsibility and pay the service tax on behalf of the service receiver?**
---
### Answer:
* **Yes, the GTA can voluntarily pay the service tax on behalf of the service receiver,** but this is not the usual practice.
* The law mandates that the **service receiver is liable to pay service tax under reverse charge**, but there is **no prohibition on the service provider (GTA) paying it on behalf of the receiver** if both agree.
* In such cases, the GTA can collect the service tax amount from the receiver as part of the invoice or bear the tax themselves as a business decision.
* However, from a **legal compliance perspective**, the **service receiver remains liable to discharge the service tax** under Section 68(2). The GTA’s payment is more like a convenience or arrangement between parties.
---
### Important Points:
* **Service receiver must disclose and account for the service tax liability** in their service tax returns even if GTA pays it on their behalf.
* If GTA pays service tax on behalf of the receiver without recovering from them, it becomes the GTA’s expense.
* Both parties should maintain proper documentation for audit purposes.
---
### Summary:
| Aspect | Position |
| --------------------------------- | ----------------------------------------------------- |
| Liability to pay service tax | Legally on the service receiver (Section 68(2)) |
| Can GTA pay on receiver’s behalf? | Yes, voluntarily possible but not mandatory |
| Impact on service receiver | Must account for tax liability in returns |
| Impact on GTA | If paying without recovery, tax paid is their expense |
---
If you want, I can help draft a sample agreement or invoice wording for such arrangements. Would that help?
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