Point of Taxation & GTA

Query

At present, we are paying Service tax on GTA on payment basis (i.e.when we are paying the amount to the transporters on due date).  During the audit of Central excise team, they informed us to pay the service tax of GTA on Bills booking basis (i.e. when I will book my bills irrespective of payment made).  Now, I am in confusion, which one is right either payment basis or bills booking basis.

Answer

Rule 7(b) of Point of Taxation, Rules 2011 (as amended vide notification number 25/2011 dated 31.3.2011) states the following

"(b) the persons required to pay tax as recipients under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Finance Act, 1994;

shall be the date on which payment is received or made, as the case maybe

Provided further that in case of services referred to in clause (b) where the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist :"

In short, it means that service tax has to be paid "on payment basis" of GTA bills if payment is made within 6 months from the date of the invoice. If payment is not made within 6 months from the date of invoice then service tax would become payable as if Rule 7(b) does not exist (ie) service tax payment has to be made based on the date of invoice.