Interest earned in emi facality

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 January 2014 If a company renders service and provide its customer an option to make the payment on immediate basis or to pay on EMI basis.

Whether interest earned on EMI would be liable to service tax.

In my view interest on EMI should be liable to service tax since it is not in the nature of "Interest on Loan/Advance/Deposit" as specified in Negative list. Further, it is not in the nature of interest for delay in payment of consideration as provided in Valuation Rules since company has not right to sue the customer for this delay but is an payment option agreed by the company.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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09 January 2014 well it seems that yes, it is taxable!! Even CBEC internal circular on negative list gives indirect indication that EMI may not be included in negative list.

https://www.cbec.gov.in/ub1213/do-jstru2.pdf

But I would also prefer additional opinions.

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