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Interest rates on delayed payment of Service Tax - a walkthrough

AUGUST 05, 2014

By Gopal J Chosla

RATE of interest, on delayed payment of service tax, payable by the service provider under direct charge/ recipient of service under reverse charge, from inception of Service Tax provisions in Finance Act, 1994 to recent change in Budget 2014-15 is given in table below.

Table

Sr. No.

Period

Rate of interest #

Remarks

1.

01.07.1994 to 15.07.2001

18%

 

2.

16.07.2001 to 15.08.2002

24%

 

3.

16.08.2002 to 09.09.2004

15%

 

4.

10.09.2004 to 31.03.2011

13%

 

5.

01.04.2011 to 30.09.2014

18%

 

6.

6(i)

6(ii)

6(iii)

From 01.10.2014 till date of payment of service tax.

18% up to six months (i.e.01.10.2014 to   31.03.2015)

24% beyond six months to one year.  (i.e.  01.04.2015 30.09.2015)

30% beyond one year (i.e. 01.10.2015 till the date of payment of Service Tax).

w.e.f. 01.10.2014

[# - Section 75 of Finance Act, 1994, read with relevant notifications issued from time to time.]

A question may arise in the mind of assessee as to how the changed rate of interest would be applicable for delayed payment of service tax?

It can be seen from the above table that Central Government has declared different rate of interest for different period.  Therefore, while calculating interest amount, assessee has to refer rate of interest given in above table for the period starting from due date of payment of service tax till actual date of payment of service tax. To understand in better way illustration is given below.  

Service Tax Department issued a Show Cause Notice on 01.07.2014  to M/s. ABC Ltd  demanding service tax of Rs.10,00,000/-, which was to be paid to the Government treasury on 31.03.2010 (due date for payment of service tax).

If, M/s. ABC Ltd will pay demand of Rs.10,00,000/- on 31.12.2015 (actual date of payment of service tax) to the Government treasury, interest liability will be as under-

Amount of ST (Rs.)

Period

No. of days delay

Rate of Interest

Interest Amount

Remarks

10,00,000

01.04.10 to 31.03.11

365

13%

1,30,000

refer Sr. No. 4 of above table

01.04.11 to 30.09.14

1279

18%

6,30,739

refer Sr. No.5 of above table

01.10.14 to 31.03.15

182

18%

89,753

refer Sr. No.6(i)  of above table

01.04.15 to 30.09.15

183

24%

1,20,329

refer Sr. No.6(ii)  of above table

01.10.15 to 31.12.15

92

30%

75,616

refer Sr. No.6.(iii)  of above table

Total interest amount

    

10,46,438

  

Therefore, for calculating interest on delayed payment of service tax, date of issue of demand is not relevant. The important criteria are due date of payment of service tax, actual date of payment of service tax and rate of interest prevailing during the material period.    

(The author is General Manager- Excise, Cadila Healthcare Limited, Sanand, Ahmedabad)

(DISCLAIMER: The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site..)

 RECENT DISCUSSION(S) POST YOUR COMMENTS
   
 
Sub: Calculation of interest

I fear that the interest calculation in the example may not be correct. if 6 months from due date is already over on 1.10.14, 24 % will apply from 1.10.14. If one year from due date is already over on 1.10.14, 30 % will apply from 01.10.14. We will not 18 % for six months from 1.10.14; 24 % / 30 % thereafter. This view is also supported by TRU letter para 3.1.

Pl check.
Natarajan



Posted by jaikumar seetharaman
 

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