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Applicability of Service Tax
if say any financial institution quotes interest to its borrowers in multiple component e.g. say gross interst rate is 18% out of which Normal Interst is 15% and service and tracking interest is 3%.
Second type of interest is collected as a additional services provided to the borrower.
My query is - calling something a interest cannot not make it a interest if it is collected against the services. My view is that it should be covered under services and service tax should be charged on it.
Kindly help
Replies (1)
Interest at present has been specifically kepts out of the taxable services provided by banking and Fin services.
It is said that interest cannot be called a service as there is no value addded service there. Only the cost of capital is recovered. However this matter once made taxable may lead to several disputes.
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