Banking Service - Exemption to Excluded value?

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Dear Friends,

New NTF - 04/2006 - ST gives exemption as under

hereby exempts the taxable service, specified in sub-clause (zm) of clause (105) of section 65 of the Finance Act, that is to say the financial leasing services including equipment leasing and hire-purchase as defined in item (i) of sub-clause (a) of clause (12) of section 65 of the Finance Act, provided or to be provided to any person, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is equivalent to the service tax calculated on ninety per cent. of an amount, forming or representing as interest, i.e. the difference between the installment paid towards repayment of the lease amount and the principal amount contained in such installment paid.

But note that clause  (viii) of Explanation 1 to Sec - 67 specifically provides that 'interest on loan' will not form part of the value of taxable services.

Further, New Draft Rule also provides same exclusion. Then Why this NTF 4/2006, provides exemption upto 90% of interest which is already excluded from taxable value?

Regards.
Replies (3)
Dear Chauhan Anand,

Sec 67 is replaced by a new sec. 67. In the new sec 67, there is no such exclusion given for interest on loans.

TONY. M.P. , THRISSUR,   KERALA
94470 80631
trc_mptony @ sancharnet.in

Dear Mr. Tony,

Pl. refer Draft Valuation Rules, in which all exclusions of section 67 is reproduced  just by "Cut & Paste".

So there is still exclusion of interest on loan.

Regards.
Dear Chauhan,

What you said is right.

This notification cannot be justified.

Regards,
TONY.M.P.


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