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Service tax on interest

Arvind Sharma (ACA) (1432 Points)

01 February 2013

Hello Everyone,

I was reading Terms & Conditions of a Bank for Credit Card... I found that Service Tax will be levied on Interest Charges on late payment.

Is it valid..?? I mean, interest on late payment is of a penal nature, that means there is no service at all, but a penalty imposition. So, when there is no service, then how can service tax be levid..??

Members, plz clerify

Reply awaited..

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2 Replies

Vaisakh Ayyappan Prakash(VAP) (student) (474 Points)
Replied 01 February 2013

hey act has provided a provision where institution can levy tax on penalties and interest if applicable.

you can check particular site for further information

hope it helps

https://www.servicetax.gov.in/st-profiles/paymntcards-services.htm

Arvind Sharma (ACA) (1432 Points)
Replied 01 February 2013

Ok.. I checked it. Also refer valuation rules. but still I am not in that favour.. You can also check Telephone bills, where they charge Rs 10 - 40 depending upon bill amount, i.e. penalty, but NO Service Tax on that amount.. So I can say no service tax is leviable on penalties..

and Interest on late payment is also of penalty nature.. So no interest should be charged on it.

Thats my view., I am looking for any judgement in favour or opposit.