Interest on delayed paymeny and how to calculate it?

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Jai Bajaj (Querist)
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19 October 2009 Q.1 What is interest rate applicable for delay payment in service tax and please also tell how to calculate is?

Q.2 From 1st April 09 no service tax was paid, there is any penal provision other than interest?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 October 2009 1. Interest rate is 13% per annum. Interest is payable for the period from the 1st day after the due date till the date of payment of the defaulted service tax amount.

2. Penalty shall not be less than Rs.200/-for every day during which such failure continues or @ 2% of such tax per month whichever is higher so however that the penalty amount shall not exceed the amount of service tax payable.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 October 2009 In reply to the PM, SIR ,I request u to go through the following extract:-

76. Penalty for failure to pay service tax.
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.

Illustration
X, an assessee, fails to pay service tax of Rs. 10 lakhs payable by 5th March. X pays the amount on 15th March. The default has continued for 10 days. The penalty payable by X is computed as follows:
2% of the amount of default for 10 days = 2 x 10, 00, 000 x 10/31= Rs. 6,451.61
Penalty calculated @ Rs. 200 per day for 10 days =Rs. 2,000
Penalty liable to be paid is Rs. 6,452.00.

Pl note from the above that penalty is to be paid in addition to tax and interest.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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19 October 2009 To avoid penalty u/s. 76, you can take shelter u/s. 73(3).

If the tax is paid along with interest and intimated to the AC/DC, department can not proceed to recover penalty.

Further, one can not penalise him/her self.

Pay the tax with interest and forget the penalty u/s. 76.

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