Service tax can be levied on penalty collected from service provider
This query is : Resolved
04 November 2015
A service receiver bank can collect service tax on penalty amount charged by it on default made by service provider company?
05 November 2015
Please elaborate the query.. with an example
24 July 2025
Regarding service tax on **penalty collected by a bank from a service provider** for default:
* **Penalty or fines** imposed for breach of contract, delay, or default **are not considered a 'service'** under service tax law.
* Service tax is levied on **consideration for a taxable service** provided.
* A penalty or liquidated damages collected by the bank **do not represent consideration for a service** rendered by the bank.
* Therefore, **service tax is generally NOT applicable on penalty amounts collected** from a service provider by the bank.
---
### Summary:
* **No service tax on penalty/late fees/ liquidated damages charged as a penalty by service receiver.**
* Service tax applies only on the value of actual services provided, not on penalties for non-performance or defaults.
---
If you want, I can help draft a detailed note or reference any relevant notifications or case laws on this. Would you like that?
* **Penalty or fines** imposed for breach of contract, delay, or default **are not considered a 'service'** under service tax law.
* Service tax is levied on **consideration for a taxable service** provided.
* A penalty or liquidated damages collected by the bank **do not represent consideration for a service** rendered by the bank.
* Therefore, **service tax is generally NOT applicable on penalty amounts collected** from a service provider by the bank.
---
### Summary:
* **No service tax on penalty/late fees/ liquidated damages charged as a penalty by service receiver.**
* Service tax applies only on the value of actual services provided, not on penalties for non-performance or defaults.
---
If you want, I can help draft a detailed note or reference any relevant notifications or case laws on this. Would you like that?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Where to Find Inspiration for Business Management Dissertation Topics?
- ALIMONY AND MAINTENANCE CHARGES
- Document to add trade name
- GST Partners addition
- Non-disclosure of Foreign Shares & Dividend in Past ITRs – How to Rectify & Report Now?
- ICWAI-Final best coaching center for online by English
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Refund_ Insufficient in credit ledger
- EPF Withdrawal Where to show in ITR2
- 54 F disallowance presentation in ITR 2
Trending Online Classes
-
Input Tax Credit, GST refunds and Recovery of refunds- Roadblocks and way outs
CA Nipun Arora03 September 2025 -
GST LIVE Certification Course - 43rd Weekdays Batch(With Govt Certificate)
Industry Expert15 September 2025
CAclubindia
