Service tax on penalty

Invoice was issued to client regarding certain payment. Since Payment was not made in time, was thinking to levy some charges/penalty to the client. Shall that amount be charged with servie tax or without service tax.

Note: Seperate Invoice will be issued for the late paymet charges.

Replies (3)

Without Service Tax

any refrence??

Refer the definition of service u/s 65B(44) - where one of the condition is that an activity should be carried out for a consideration, so penalties are not in the nature of activity for a consideration.

Also since seperate invoice is issued no need to charge service tax. Further you can refer Circular No. 96/7/2007 with regard to telecom service where it has been clarified that an amount collected for delayed payment of a telephone bill is not to be treated as consideration charged for provision of telecom service and, therefore, does not form part of the value of taxable service under section 67 read with Service Tax (Determination of Value) Rules, 2006.

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