Query on section 75 of finance act 1994


S.Vix (ARTICLED CLERK)     21 January 2016

S.Vix
ARTICLED CLERK 
 60 points

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My query is based on Proviso to Section 75 of finance Act, 1994 as amended w.r.t. interest on delayed payment of service tax. The said section and proviso thereto is reproduced below:

 

75. Interest on delayed payment of Service Tax –

 

Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made there under, who fails to credit the tax or any part thereof to  the account of the Central Government within the period prescribed, shall pay simple interest  [at such rate not below ten per cent and not exceeding thirtysix per cent per annum as is for the time being fixed by the Central Government, by Notification in the Official Gazette] for the period] by which such  crediting of the tax or any part thereof is delayed.]

 

Provided that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh  rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of  interest, shall be reduced by three per cent. per annum

 

As per the proviso, rate of interest shall be reduced by 3% p.a. from the rate of interest notified u/s 75. The notified rate of interest is 18% p.a. w.e.f. 01/04/2011 and thus the beneficial rate of interest is 15% p.a.

 

The benefit of reduction is available to a service provider whose taxable service in a finacial year does not exceed Rs 60 lakh during any of the financial years covered in the notice or during the last preceding financial year, as the case may be.

 

Now, the query is-

What does the “last preceding financial year mean? Whether it is the financial year preceding the date on which the payment is made or the financial year preceding to the date to which the liabiltiy relates for eg if a person pays the tax related to the F.Y. 2011 - 12 in the year 2014 - 15 in this case the last preceding financial year is F.Y. 2010-11 or F.Y. 2013-14

 

TARUN SINGHAL (student)     21 January 2016

TARUN SINGHAL
student 
 41 points

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Hi S.Vix,

In my opinion, if a person wants to pay his service tax liability for the period 2011-12 in 2014-15 then as per proviso to the section 75 of the Finance Act, if his value of taxable service provided in year 2010-11 does not exceed Rs. Sixty Lakh than he can avail the benefit of 3 % concessional rate.

avater

S.Vix (ARTICLED CLERK)     22 January 2016

S.Vix
ARTICLED CLERK 
 60 points

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I agree with your view Mr.Tarun but my doubt is in other Sections they use the words "previous financial year" whereas in section 75 they are using the word "last preceding financial year" is it possible interpret both in same way. Thanks you for your reply

 

avater

S.Vix (ARTICLED CLERK)     22 January 2016

S.Vix
ARTICLED CLERK 
 60 points

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I agree with your view Mr.Tarun but my doubt is in other Sections they use the words "previous financial year" whereas in section 75 they are using the word "last preceding financial year" is it possible interpret both in same way. Thanks you for your reply

 

avater

VSRM KASYAPA (RETIRED SUPERINTENDENT)     13 June 2019

VSRM KASYAPA
RETIRED SUPERINTENDENT 
 32 points

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immediately preceding financial year is the correct interpretation


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