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Interest on delayed remittance of service tax

mukundasy (manager) (97 Points)

08 November 2010

Dear Team,

Please let me know as to what is the rate of interest on delayed remittance of service tax.

I feel that it is presently 10% as against earlier rate of 13% p.a. (simple interest).

With Regards,

Mukunda

9900924000

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5 Replies

sankalp (Tax Consultant ( Income Service Sale Tax )) (107 Points)
Replied 08 November 2010

Dear Mukunda

Delay in payment of ST including a part thereof attract simple interest in terms of section 75 of the Act. The rate of interest is as prescribed form time to time in accordance with this section. At present the rate of interest is 13% per annum ( notification No.26/2004/ST dt. 10.9.2004) Further failure to pay st also attracts a penalty under section 76 of the Act which shall not be less than Rs.200 for every day during which such failure continues of at the rate of 2% such tax per month Which ever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of ST However such penalty would not exceed the st payable.

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Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 08 November 2010

It is 13% p. a. only from the due date till the date of payment of service tax.

Ashish Sharma (Service) (1028 Points)
Replied 09 November 2010

Agree With Sankalp and Aditya Sir, further the rate of interest calculated on defaulted days only, which means it is calculated on day basis instead of monthly like in TDS and Income Tax and the Penalty can be avoided if the Service Tax deposit with interest before receiving show case notice from department.

Mushak shareef (eFiling Consultant) (144 Points)
Replied 09 November 2010

I agree with Mr Ashish and the calculation is -- Amount to be payable *13%* defaulted days / 365

CA. R.Sankar Bharadwaj (Working) (59 Points)
Replied 25 November 2010

I agree with Mr.Asish who also pointed out the latest amendment made by finance act that in case ST has been paid before the issue of SCN mandatory penalty shall not be levied. so now mandatory nature of penalty has undergone a change.still though mandatiory but avoidable in nature