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 “financial year covered by the notice” mean?
Consider the following instance.
A service provider’s last preceding financial year taxable service was Rs. NIL. During FY 2012-13, his taxable service crossed Rs 60 lakh , say Rs 90 lakh, till date. Service tax collected in Oct’ 2012 has not yet been paid and is planning to pay the same along with interest by 31st Dec., 2012..
If we go by the second condition of the proviso i.e. taxable service does not exceed Rs 60 lakh during last preceding FY, then he is able to claim the benefit of 3% and can pay the interest @ 15% pa instead of 18% p.a.
But the department may issue notice for the FY 2012-13 for delay in payment of service tax anytime within 18 months from relevant date. In such a case, the FY 2012-13 is covered in the notice and thus he will not be able to take the benefit of 3% reduction.
Is my understanding correct? If yes, then the service provider in the instant case is not getting the benefit of reduced rate of interest even though the proviso specifies less than Rs 60 lakh taxable service in the last preceding FY. In the circumstances, who will actually get the benefit?
Members may please clarify the query.
Thanks and regards
Sujit Talukder
CAclubindia
