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By: Dr. Sanjiv Agarwal
March 21, 2009
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Notification No. 27/2006-ST, dated 21-9-2006 has inserted a proviso in sub-rule (2) of Rule (6) providing for mandatory e-payment though internet  banking  w.e.f. 1-10-2006 for assessees who have paid tax of over rupees fifty lakhs in the preceding financial year or the current year.

Central Government has provided the facility of e-payment of service tax and Central Excise,  advantages of which are as follows-

(a)   Ease of operations and convenience

(b)   Availability of facility on 24 x 7 basis (i.e., any time facility)

(c)   Selection of appropriate tax type from drop down window

(d)   Online filing of challan and payment of taxes.

(e)   One can pay on behalf of firm, company or others

(f)    Instant cyber receipts for payments made can be obtained

(g)   Filling of single challan form

(h)   Challans at desk top

(i)    Service is free of charge

GAR-7 Challan- A new single copy challan form GAR-7 has been introduced under electronic accounting system in Central Excise and Service Tax in which after realization of cheques etc. assessees will be provided a counterfoil of the challan duly receipted by receiving branch on proof of payment.

Mandatory Payment by Electronic Mode

Authority                                    Notification No. 27/2006-ST dated 21.9.2006

Date of Applicability                   1st October, 2006

Jurisdiction                                 All over India

Eligible Assessees                     All persons liable to pay service tax i.e., service providers and persons liable to pay service tax under sections 68(2) and 66A meeting the criteria

Criteria for mandatory               Those persons who are required to -

payment                                     (a)   pay service tax and paid more than India Rs. 50 lakh in preceding financial year (2005-06), or

                                                 (b)   already paid more than India Rs. 50 lakh during the current financial year

                                                 Following points may be noted -

                                                 —    Payment upto India Rs. 50 lakh including India Rs. 50 lakh is not mandatorily required to be made via e-payment.

                                                 —    Eligibility criteria is for service tax only, not for aggregate of penalty or interest.

Challan to be used                      GAR-7

Payment by other Assessees       Encouraged to pay service tax electronically


Following proviso has been added to Rule 6(2) of Service Tax Rules, 1994 to prescribe

mandatory e-payment of service tax-

"Provided that the assessee, who has paid service tax of rupees fifty lakh or above in the preceding financial year or has already paid service tax of rupees fifty lakh in the current financial year, shall deposit the service tax liable to be paid by him electronically, through internet banking."

 Work flow of e-payment

§         Taxpayer logs on to the bank's web site.

§         The bank's site allows the taxpayer to enter into the secure banking area after verifying the user ID and password provided to the taxpayer by the bank;

§         Once in the secure banking area of the bank, the tax payer can select the "Pay Tax" menu which will further offer option to select various taxes he can pay on-line; guided to the challan form for filling up the details;

§         There will be an on-line validation for Assessee Code, Location Code, Account Head against the masters provided to the bank from the concerned Pay and Accounts Office. The validation is mandatory and only successful entrants will be allowed to proceed further;

§         Banks will obtain and keep only such Assessee Codes, in their master, which belongs to the assessee who falls under the Commissionerates for which the bank is authorized to collect Indirect Tax revenue. This will ensure that the bank is not collecting and accounting indirect tax revenue for a Commissionerate for which it is not authorized;

§         On successful validation of the details in the challan format, the taxpayer is guided to a 'make payment screen' showing the payment details filled in by the taxpayer on the challan format;

§         The taxpayer gets an option to "Continue" or "Cancel";

§         On selecting "Cancel", the taxpayer is prompt for entering his user ID and password to enter into the bank's e-transaction module;

§         On selecting "continue", the taxpayer is prompt for entering his user ID and password to enter into the bank's transaction module;

§         This screen further leads the taxpayer to the page describing his account details with the bank;

§         Taxpayer selects the account to be debited;

§         Authorise the payment transaction;

§         On successful payment transaction, the account of the taxpayer gets debited and taxpayer gets a unique system generated payment confirmation number;

§         The concerned Focal Point Bank prints the challan and include in the scroll on a day to day basis and forward to the concerned PAO and, to the Range Officer as per the existing procedure and ensures two copies of the challan in delivered to the taxpayer;

§         Fund transaction and settlement with Government will be the exclusive responsibility of the bank as per the existing procedure.

Some hints for paying Service Tax by GAR - 7 Challan

  • GAR - 7 (proforma for Central Excise / Service Tax payments) is to be issued for payment of tax w.e.f. 7th April 2007.
  • Last date for e-payment is 6th day of month (i.e., one day more is granted)
  • To avoid errors, it is advisablel that assessees get the GAR-7 challan pre printed containing details of permanent nature eg, name, address, telephone details, assessee code number, commission/ division/ range code etc.
  • GAR -7 is a single copy Challan and unlike TR-6 Challan, four copies are not required.
  • GAR -7 Challan is available with private vendors in market or soft copies are available at NSDL or CBEC websites ( or ).
  • All payments from April 2007 are to be made in GAR -7 Challan only.
  • For GAR - 7, Challan Identification Number (CIN) is necessary. CIN contains seven digit BSR code of Bank branch, date of deposit of tax and serial number of Challan.
  • Mention correct PAN based code number so that the amount credited will be debited to assessee's name correctly failing which it will be debited to sundry assessees.
  • For Service Tax, GAR-7 Challan should be in yellow colour with black printing (in case of ordinary payment).
  • Use separate challan for payment of different taxes. Don't mix service tax, excise duty or customs  duty in single challan.
  • Please ensure that information submitted in challan GAR-7 in legible, and neat so that correct information is captured
  • CIN is stamped on the acknowledgement receipt to identify the payment of Service Tax. It is the proof of payment.
  • If acknowledgement is lost or misplaced, you can approach the concerned bank branch to issue a certificate of payment particulars including CIN.
  • E-payment made upto 8 p.m. are considered to be paid on that date after which it would be considered as paid on the next day.

    By: Dr. Sanjiv Agarwal - March 21, 2009


    Discussions to this article


    sir, where in a situation when bank's website is not working properly or in any other situation, can payment made by physically depositing challan in a bank will b valid if the same is deposited on 6th. whereas, last date is 5th in case of payments otherwise than by e-payment, whether penal provisions are attracted ? with regars viresh shah

    By: viresh shah
    Dated: 23/03/2009

    Our CA firm is paying service tax app. Rs. 2 Lac Can we pay the service tax online

    By: CA S L Gupta
    Dated: 24/03/2009

    sir,we are sumitting the form TR-6 for the payments of service tax but from now bank has said to us that theform GRA 7 proforma for service tax payements should be collected.We dont know how it is filled.Please tell us.we will gratefull of you.

    By: mukesh sharma
    Dated: 01/04/2009

    On our making E-payment for the monthly Excise Duty, the deopartment is insisting to give signed copy of the E-Challan alongwith ER-1. Is it required to sign the E-Challan?

    By: Jose Thachil
    Dated: 03/07/2009

     We paid service tax through e- payment, but e-payment service tax challane not received

    By: jolly paul
    Dated: 25/10/2010


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