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liability of service tax in case of advance payments

Harshit (CA Final) (51 Points)

23 December 2010  
Kindly solve my query, i am in confusion related to this issue:
limited company:
1)In case of GTA whether the Service tax must be deposited to the Gov. at the time of Liability booking or at the time of actual payment to the transporter, who is providing services to us.
For example: The transporter has provided us services and given us the freight bill lets say, in the month of Oct 08 2010 and on Oct 08 we have created the liability in our books but we are actually making payment to the transporter on the month of Dec. Whether in this case we will deposit service tax in Oct 10 ( or we can say by 5th of Nov 10) or we will deposit the service tax in Dec 10( or we can say by 5th of Jan 11).
2) If we are paying advance to the transporter then wether the liability of service tax arises on advance payment to the trnsporter or it arises on recieving the bill and crediting the same in the books i.e after creation of liability?????
promt reply would be appreciated...

 10 Replies

shashi (Acct. Manager) (28 Points)
Replied 23 December 2010


Liability of payment of service tax arises on payment basis and not on due basis.

Hence in both the cases i.e., (actual payment agt. bill & advance payment) you need to pay the service tax in the following month upto 5th after making the payment.


Harshit (CA Final) (51 Points)
Replied 24 December 2010

thanks shashi for your response, Further i would like to clarify few practical aspects of the same... suppose if an advance of Rs.50000 is given to a transporter and the builty is still to be recieved then S.T shall be charged on this 50000 i.e. 10.3% of Rs 50000?? if yes, then at the time when the builty is recieved say of Rs.40000 then wat will be the treatment (since the service tax has been deducted on 50000 instead of 40000)

shashi (Acct. Manager) (28 Points)
Replied 24 December 2010


You can adjust the balance payment of service tax i.e., 10.3% of Rs 10000/- agt. service tax payable agt. other bills for the same period.

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory)   (861 Points)
Replied 24 December 2010

Shashi is right

U S Sharma (glidor@gmail.com) (21031 Points)
Replied 24 December 2010

its all accounting clarity

if u keep the payment in "advance to suppliers" then no tax liability unless the invoice is submitted and journal entry is made from advance account to service provider's account, 


if u keep the payment posted as "freight or carrige" on the date of payment, then u have to take invoice for full consideration either in one or in parts, otherwise ur accounts will not be completed. 


service tax liablity is on payment under GTA head only,

Harshit (CA Final) (51 Points)
Replied 25 December 2010


Yogesh Gupta (Service) (26 Points)
Replied 28 December 2010

Hi, Can anybody tell what is the treatment of "ADVANCE" received from client, whether we booked Service Tax on ADVANCE PAYMENT RECEIVED agt. future billing.

shashi (Acct. Manager) (28 Points)
Replied 28 December 2010

Hi Yogesh


Service tax needs to be paid agt. advance payment received agt. services, as liability of service tax payment is on receipt basis and your liability arises as soon as you receive the payment. 

Mousam (Executive Accounts) (21 Points)
Replied 14 January 2015

Kindly Solve my problem... We have paid Rs.30 lacs to our transporter as advance for transportation charges. And did agreement with them to deduct the amount of advance in every month in 5 equal installments from their monthly bills.

Say, if in any month transporter raised bill to us Rs.15 lacs, then we deduct Rs.6 lacs from their bill and paid the balance amount. So, what will be the tax implication on that. How will we pay the GTA Service Tax ?

We paid the advance in October 2014.

Please advice on urgent basis.


Waiting for prompt reply please.



@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)
Replied 15 January 2015

please refer rule 7 of point of taxation rules.

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