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Discussion > Service Tax > Queries >

Service Tax - Interest on Delayed Payment

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Coach for Professional Examinations

[ Scorecard : 178]
Posted On 11 May 2011 at 11:39 Report Abuse

Sec 75 of Finance Act, 1994 as amended by Finance Act, 2011 w.e.f.8-4-2011 is reproduced as thus for ready reference:



"Every person, liable to pay the tax in accordance with the provisions of Sec 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the prescribed period, shall pay simple interest at such rate not below 10% and not exceeding 36% p.a., as is for the time being fixed by the CG, by notification in the official gazette for the period by which such crediting of the tax or any part thereof is delayed:

Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupess during any financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by 3% p.a."




Could anyone please explain the meaning of the proviso inserted by Finance Act, 2011, more particularly the words... "during any financial years covered by the notice or during the last preceding financial year, as the case may be"?



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U S Sharma
glidor@gmail.com

[ Scorecard : 19371]
Posted On 11 May 2011 at 15:33

Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupess during any financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by 3% p.a."

==============================================================================

criteria 1: max rate of interest upto 36% for the service providers who are under "statuary audit" of sec 44AB, incometax

for service proder who are under compulsary audit , 36%, and for those who are not in audit die to their lower turnover ........36-3=33% applicable

Criteria2: Department has issued the notice for recovery of short payment or not .........

2a)... if department has issued notice then the rate may go higher of notificed rate i.e 18% p.a and can peak upto 36% or 33% as the case maybe.

2b) if department has not issued notice but the assesee has lapsed the oppertunity to pay and revise the return, then also the provisions apply 

2c) if assessee has found himself and paid with 18% int and revised the return within the revision time, then..these provisions does not apply 

 

 

 

 

disclaimer : this is my personal interpretation, views of other members are welcome.





chamatkaribaba
Practicing Indirect Tax

[ Scorecard : 92]
Posted On 11 May 2011 at 15:52

It says that maximum amount of interest can be imposed at 36% but by Notification, government has fixed interest rate at 18% increasing it from 13%.

But, in case of such assessee, whose turnover is less than 60 Lakhs, the rate of interest would be 15% reduced by 3%.

Now, how to calculate the turnover of 60 Lakhs? It says that the turnover should not cross the 60 lakhs Rs. in a financial year in which notification has been issued. Or if in that year, it is less than 60 lakhs but in preceding year to that if turnover is more than 60, then, original interest rate of 18% would be applicable.

Now, Hope it is clear.




Ankit Mathran
Coach for Professional Examinations

[ Scorecard : 178]
Posted On 11 May 2011 at 17:43

Originally posted by : chamatkaribaba

It says that maximum amount of interest can be imposed at 36% but by Notification, government has fixed interest rate at 18% increasing it from 13%.

But, in case of such assessee, whose turnover is less than 60 Lakhs, the rate of interest would be 15% reduced by 3%.

Now, how to calculate the turnover of 60 Lakhs? It says that the turnover should not cross the 60 lakhsin a financial year in which notification has been issued. Or if in that year, it is less than 60 lakhs but in preceding year to that if turnover is more than 60, then, original interest rate of 18% would be applicable.

Now, Hope it is clear.

Do you mean that the turnover should not exceed Rs. 60 lakhs both in the year of issue of notification and in the preceding year?




chamatkaribaba
Practicing Indirect Tax

[ Scorecard : 92]
Posted On 11 May 2011 at 20:28

Originally posted by : Ankit



Originally posted by : chamatkaribaba




It says that maximum amount of interest can be imposed at 36% but by Notification, government has fixed interest rate at 18% increasing it from 13%.

But, in case of such assessee, whose turnover is less than 60 Lakhs, the rate of interest would be 15% reduced by 3%.

Now, how to calculate the turnover of 60 Lakhs? It says that the turnover should not cross the 60 lakhsin a financial year in which notification has been issued. Or if in that year, it is less than 60 lakhs but in preceding year to that if turnover is more than 60, then, original interest rate of 18% would be applicable.

Now, Hope it is clear.




Do you mean that the turnover should not exceed Rs. 60 lakhs both in the year of issue of notification and in the preceding year?

Excatly. That's how I have understood it. So, the turnover should not exceed Rs. 60 lakhs both in the year of issue of show cause notice and in the preceding year.




Ankit Mathran
Coach for Professional Examinations

[ Scorecard : 178]
Posted On 11 May 2011 at 21:10

Originally posted by : chamatkaribaba




Originally posted by : Ankit








Originally posted by : chamatkaribaba




It says that maximum amount of interest can be imposed at 36% but by Notification, government has fixed interest rate at 18% increasing it from 13%.

But, in case of such assessee, whose turnover is less than 60 Lakhs, the rate of interest would be 15% reduced by 3%.

Now, how to calculate the turnover of 60 Lakhs? It says that the turnover should not cross the 60 lakhsin a financial year in which notification has been issued. Or if in that year, it is less than 60 lakhs but in preceding year to that if turnover is more than 60, then, original interest rate of 18% would be applicable.

Now, Hope it is clear.




Do you mean that the turnover should not exceed Rs. 60 lakhs both in the year of issue of notification and in the preceding year?






Excatly. That's how I have understood it. So, the turnover should not exceed Rs. 60 lakhs both in the year of issue of show cause notice and in the preceding year.

"during any financial years covered by the notice or during the last preceding financial year, as the case may be"?

The words "as the case may be" cannot be ignored. Use of the words "as the case may be" clearly implies that either of the two depending upon something shall apply.




P. SREE SUDHA
Research Scholar

[ Scorecard : 26]
Posted On 11 May 2011 at 21:26

Whether levy of penality of Rs 20000 is valid for non filing of ST 3 return ? What are the legal provisions to challenge the law governing penal provisions




Ankit Mathran
Coach for Professional Examinations

[ Scorecard : 178]
Posted On 11 May 2011 at 23:04

What I could interpret, keeping in mind the words "as the case may be", is that the proviso also provides a transitional provision -


1) For service tax liability arising during the period of notice [notice refers to Notification No.14/2011-ST dated 1-3-2001, effective from 1-4-2011 which makes the interest rate 18%; hence, period of notice means the period commencing April 1, 2011], the 60 lakhs to be checked in the relevant current financial year.


2) For service tax liability that had already arisen in the preceding financial year, i.e. financial year preceding to the period of the said notice (i.e. 2010-11), but the tax was not paid, the rate is 18%. Say ST for the month of march is not paid by 31st march, 2011 and is paid on 20th April, 2011. The rate of interest from 1st april would be 18%. But since the words "or during the last preceding financial year, as the case may be" have been used, it means that if in the preceding year, i.e. year ending 31st March, 2011 (in respect of whose service tax liability we are presently discussing) the t/o was upto 60 lakhs, the rate would be 15%.




chamatkaribaba
Practicing Indirect Tax

[ Scorecard : 92]
Posted On 11 May 2011 at 23:07

Mr. Ankit, what you said is correct. I think while typing, somewhere I did a mistake of writing 'Both'. If the turnover crosses 60 lakh in a year either in the year covered by notice or in previous year, this provision of 15% interest will not be applicable.




Ankit Mathran
Coach for Professional Examinations

[ Scorecard : 178]
Posted On 11 May 2011 at 23:16

Originally posted by : Ankit
What I could interpret, keeping in mind the words "as the case may be", is that the proviso also provides a transitional provision -

1) For service tax liability arising during the period of notice [notice refers to Notification No.14/2011-ST dated 1-3-2001, effective from 1-4-2011 which makes the interest rate 18%; hence, period of notice means the period commencing April 1, 2011], the 60 lakhs to be checked in the relevant current financial year.

2) For service tax liability that had already arisen in the preceding financial year, i.e. financial year preceding to the period of the said notice (i.e. 2010-11), but the tax was not paid, the rate is 18%. Say ST for the month of march is not paid by 31st march, 2011 and is paid on 20th April, 2011. The rate of interest from 1st april would be 18%. But since the words "or during the last preceding financial year, as the case may be" have been used, it means that if in the preceding year, i.e. year ending 31st March, 2011 (in respect of whose service tax liability we are presently discussing) the t/o was upto 60 lakhs, the rate would be 15%.

HENCE, POINT (2) IS A TRANSITIONAL PROVISION meant by the words "or during the last preceding financial year, as the case may be". The words "as the case may be" indicate those cases where service tax liability had already arisen before 1-4-2011 (the notice applicability date). In such a case, t/o of the previous year, i.e. 2010-11, is to be seen (very logical, since the liability arose in that year).



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