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Draconian Interest

JULY 12, 2014

By G. Natarajan, Advocate, Swamy Associates

The rate of interest for delayed payment of service tax under section 75 of the Finance Act, 1994 has been substantially increased vide Notification 12/2014 ST Dt. 11.07.2014. See the following example to understand, as to how this interest liability could be a whopping figure.

S.No. Description Amount
1 Service Tax demand for the month January 2014 is being disputed Rs.10,00,000
2 The issue is finally settled at Tribunal on 31.07.2018 and the assessee decides to pay up the service tax. Let us calculate the interest payable  
3 Interest @ 18 % pa from 05.02.2014 to 30.09.2014 (176 days) Rs.86,795
4 Interest for the period from 01.10.2014 to 04.02.15 @24 % pa, as this delay is beyond six months and upto one year (127 days) Rs.83,508
5 Interest for the period from 05.02.15 to 31.07.2018 (1273 days) Rs.10,46,301
6 Total interest payable Rs.12,16,604
7 Further there may various penalties also.  

Is it an indirect strategy to make the assesses pre deposit the entire service tax demand, though section 35 F requires only 7.5 % to be pre deposited?


 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Draconian Interest

kindly re calculate the no. of days.

otherwise a good thought this write up contain.


Posted by Navin Khandelwal
 

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