JULY 15, 2014

By S Sivakumar, LL.B, FCA, FCS, ACSI, MBA, Adv.

IT is shocking to see the increase in the interest rates effective from October 1, 2014, announced by the Government, vide Notification No.12/2014-ST, dated 11.07.2014 in terms of which, the interest rate for delayed payment of service tax which is already at a high rate of 18%, would go up further, depending on the delay. I've used the table provided in the said circular, as under -

An interest rate of 30% is unheard of in any civilized country. Given the fact that service provider is liable to pay service tax even before collecting his dues from his customers, this steep increase looks totally unjustified. This high interest rate under the service tax law is to be compared with a modest interest of 18% under the VAT laws of most States, irrespective of the delays.

Compare these high interest rates payable by the hapless assessee, with the interest that the Government is supposed to pay for delayed refunds, etc. which continues to stand at a ridiculously low rate of 6% per annum, over the last 10 years or so. The assessee has to move the heavens to get interest, even in cases where he is able to get a judicial decision in his favour.

Considering that even the States charge only 18% for delayed payment of VAT, where is the justification for the Central Government to go in for this steep increase?

If this is not tax terrorism, what is?