Difference between Penalty and Interest

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 November 2010 Dear Experts,

Pls guide me on difference between interest and penalty. If a person deposit Service tax 17 days after due date (i.e. 5th of Every month), how would he determine that he should pay interest (13% p.a. on service tax payable) or penalty ( whatever the rate of penalty is)? Should he pay interest or penalty in above case?

Regards
XYZ

Sanaulla Sharief

Sanaulla Sharief (Expert)
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22 November 2010
PAYING INTEREST IS SELF ASSESSMENT SYSTEM

INTEREST RATE IS 13% FOR A YEAR, CALCULATE FROM THE DATE OF DEFAULTER TO THE PERIOD YOU ARE DEPOSITING MONEY

PENALTY WILL BE CALCULATED BY THE AUTHORITY
BUT STILL KNOW THE ACT = 76

76. Penalty for failure to pay service tax
Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a penalty which shall not be less than two hundred rupees for every day during which such failure continues or at the rate of two per cent. of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax:

Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable.