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There are two provisions under Finance Act, 1994 dealing with interest on delayed payment as given below:

Sl. No

Situation

Section No.

1

Amount collected as service tax, not liable to pay and not deposited with the government.

It is customary under indirect taxes that whatever is collected as tax from the customer shall be invariably deposited with the government. The assesse can neither keep it with him nor can he return the same to the party from whom he received. If he fails to deposit such amount, it will attract interest.

Similar provision is there under Excise also. (Vide Section 11DD of  Central Excise Act, 1944)

Section 73B

2

Delayed Payment of Service Tax:

Section 75 empowers the Central govt. to impose interest on delayed payment at the rates between 10% and 36%.

3% concession is available to the assesses whose turnover in the previous year or notice period was not above 60 lac. rupees.

Govt. notifies and revises the interest rates from time to time considering the prevailing bank rates.

Recently the interest rates have been revised through notification No. 13/2016  dated 1-3- 2016 effective from 14th May, 2016

Section 75


The following table shows the change in interest rates:

Section No.

Existing Rates

New Rates

S. 73B

                       18%

15%  ( Notification No. 14/ 2016)

S.75

          18%,  24%  and  30%

24% and 15% ( Notification No. 13/ 2016)

Evolution of     Interest Rates under Section 75 of Finance Act, 1994

Period

Rate of Interest

Remarks

1-7- 1994  to 15-7-2001

1.5% per month or part thereof

It was a monthly rate and part of the month was to be treated as a full month

16-7- 2001  to 15-8- 2002

24% per annum

increased

16-8- 2002  to 9-9- 2004

15%

reduced

10-9- 2004 onwards up to 30-9-2011

13%

Reduced further

1-10-2011 to 30-9-2014

18%

Increased with 3% concession to persons upto the turnover of 60 lac

1-10-2014 to 13-5-2016

18%, 24% and 30%

Slab rates

18%  for first 6 months;

6 months to one year—24%

Beyond one year—30%

3% concession continued.

With effect from 14th May, 2016, the interest rates under Section 75 are as given below:

Section        75

                      Situation

Rate of Interest

Concessional Rate

Service tax collected but not paid to Govt.

      24%

     21%

Other cases

      15%

     12%

Note: These changed rates are not applicable to students appearing in November, 2016 Exams.

To enrol Indirect Tax Laws subject of the author: Click here
The author can also be reached at spraoidt@yahoo.com

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