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GAURAV BEHL (CA-FINAL ) (228 Points)

29 October 2009

i face a big problem during my course of an internal audit of a company.service tax was paid late and accordingly interest is to be calculated..my point is on what amount intrest is to be calculated... i mean whether we should deduct service tax credit from from service tax collected and then calculate interest????... they had calculated interest on gross amount of service tax payable without taking cenvat credit... accordingly to me they paid interest extra.. plz advice... you are requested to plz give complete refrence of sec/ circular/ notification no./ rule or any relevant decided case with ur answer... thanx..

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13 Replies

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 29 October 2009

Dear Gaurav

Good Question . As you know that any if any person laible to pay service tax then he always pay the service tax only after adjusting the amount of service tax credit. And in the month end only the net amount of service tax is payable i.e.

Service Tax Payable = Service Tax Payable - Service Tax Credit.

And what laws say about the non payment of Service tax , it says that if ther is delay in payment of service tax the you have to pay Intt. @ 13% P.A. . So our payable amount is Net Amount Payable as mentioned above .............

So Interest is calculate on Nat Amount Payable not on Gross amount.

Hope you have no doubt.

CA GIRISH (Chartered Accountant) (1796 Points)
Replied 29 October 2009

THANKS SORABH AND I HOPE GARAV'S QUERY HAS BEEN SOLVED

GAURAV BEHL (CA-FINAL ) (228 Points)
Replied 29 October 2009

I HAD A CONTRADICTION OF VIEWS OF MYSELF AND THE STAT AUDITOR OF THAT COMPANY.. HE SAID THAT INTREST IS PAYABLE ON SERVICE TAX PAYABLE... I.E. THE GROSS AMOUNT OF SERVICE TAX COLLECTION.. THATS WHY I M ASKING U THE SOURCE OF YOUR ANSWER..

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 29 October 2009

Gaurav

You just mentioned ur stat. auditor the Interst is paybale only in case of NON PAYMENT OF SERVICE TAX , & what is non payment of service of tax . it is just the net payable amount not the gross amount .................

GAURAV BEHL (CA-FINAL ) (228 Points)
Replied 29 October 2009

ya i know that dear frnds but he is not convinced so i have no option but to show him the proof.. basically i acknowledge what u all r saying and i want the proof of the same

Naveen Gupta (CA ) (123 Points)
Replied 29 October 2009

dear gaurav

in reverse u have to ask from ur stat auditor to show notification/ circular describing that the liability is on Gross amt...........

as lnterest liability is arised only on payable amt. n if payable amt is fully set off than u dont need to pay any interest........

so ask ur stat auditor to show any notification............

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 29 October 2009

Dear Gaurav,

Just ask him what in case in any month or quarter, as applicable, the service tax credit exceeds the service tax collected. Whether he will pay interest if the nil challan is filed late. The stat auditor is not correct at his view. In any tax payment, whether direct or indirect, the interest on delayed payment has to be only on the net payment liability.

Regards,

CA. Amol G. Kabra

1 Like

Mangesh (Chartered Accountant) (50 Points)
Replied 29 October 2009

What is the difference between NON PAYMENT OF SERVICE TAX and failure to pay Service tax ????

Bcoz failure to pay Service tax has penalty of " not less than Rs.200/- per day of default or 2% per month of tax."

Niraj (Service) (29 Points)
Replied 30 October 2009

Interest is payable on net service tax amt payable. Its not Gross amt .

GAURAV BEHL (CA-FINAL ) (228 Points)
Replied 30 October 2009

thanks amol sir i found your answer good and logical

DV Subba Rao (Consultant) (22 Points)
Replied 30 October 2009

Check whether debit entry in Cenvat register is made before due date. If so, it is a proof that tax liability is discharged to thet extent of amount debited in the Cenvat register. The balance amount is outstanding and on this interest is payable.

CA PRAKASH NANWANI (AUDITOR) (27 Points)
Replied 30 October 2009

INT. IS PAYABLE ON NET SERVICE TAX AMOUNT

CA.Amit Mehta (Professional) (254 Points)
Replied 30 October 2009

i had done the service tax work as far as i know interest will be on (service tax collected - service tax credit)=balance amt interest on theses figure will be calculated refer any s.t. book these will be there