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Interest & penalty in service tax (Service Tax)

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This query is : Resolved



( Author )
12 January 2012

Dear Sir / Madam
Please do let me know the Interest & Penalty to be paid to the Govt. for delay in payment of Service Tax.
Audit query Case1:During Internal Audit of Real Estate industry of Sales Department.It was Observed that Service tax of Rs. 1.61 crore was charged & collected from the customer for sale of Commercial units on June 2011, project completed on 26th Aug, 2010 inspite of being not applicable in case of completed projects.It was also observed that the same was not deposited with the govt. till date i.e. Jan 12, 2012.What is the Interest & Penalty for not depositing the same.Please quote the relevant provision & section no also
I had discussion with the account dept. for not depositing the service tax amount collected. They said that there was insufficient funds so will be paid afterwards with interest to the govt.
I would like to know what are the major risk in the above case as they are using the service tax amt as funds & not depositing the same timely?can the statutory auditor qualify the report on such circumstances? Is this common thing which other companies also do?Please suggest.
thanks in advance...


B.Chackrapani Warrier

( Expert )
14 January 2012

1) Interest @ 18% per annum ( to be calculated for the number of days delay only) has to be paid. Refer Notification 15/2011 dated 01/03/2011.
2) Penalty can be levied under section 76 which reads as under:-
Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay
such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a penalty which
shall not be less than two hundred rupees for every day during which such failure continues or at the rate of two per cent. of such tax, per month,
whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax:

Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable.


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