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Services to related person

Kaustubh Ram Karandikar (Corporate Consultant- Central Excise & Service Tax) (519 Points)

14 September 2021

XYZ (Proprietory Concern) and PQR(Proprietory Concern) are related persons (Brothers). On behalf of PQR, XYZ had paid the amount of Income Tax and other taxes to Govt. and then subsequently recovered from PQR. Will this amount to service provided to related person under Schedule – I of Section – 7 and even if there is no consideration, XYZ will be liable to pay GST on it?

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2 Replies

Sravan (Manager-GST) (26 Points)
Replied 14 September 2021

@ Kaustubh Ram Karandikar Garu,

Based on the above facts, I am of the view that the transaction that was happed is a pure transaction in money. XYZ paid the tax(money) and later recovered from PQR. Transactions in money are not taxable in GST. when a transaction is to be taxable in GST it should be "supply" first and it should be provided in the course or furtherance of business i,e it should be provided as a part of his business but for consideration subject to schedule-I.

I hope XYZ is not in the business of providing those types of temporary loans and recover the fee/interest for it. However, interest is exempted but other fees in relation it may be taxable.

Hope I am clear.

CA. Heet Shah (Tax Consultant & Practitioner) (6174 Points)
Replied 15 September 2021

Since the service provided would suffice the condition of pure agent as mentioned under igst that would not be supply and no gst would be liable in the said transaction