Service to related person

[Kaustubh Karandikar]

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?

AI Summary

Payments by XYZ for PQR's taxes not taxable under GST; not a supply per Schedule I, Section 7. A discussion on a forum addressed whether payments made by one proprietary concern (XYZ) on behalf of another related concern (PQR) for taxes should be considered a taxable service under GST regulations. Participants concluded that since XYZ's actions do not constitute a business activity or supply under Schedule I of Section 7, it should not be liable for GST. The transaction was considered an 'on behalf' payment and could be seen as a pure agent activity, not a support service, indicating that taxing such transactions would stretch the legal provisions unnecessarily.