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Interest on service tax

Shaik ( M.com,IC(W)AI - Inter) (723 Points)

26 September 2011

Dear Sir,

we are paying service tax after due date , How can i calculate or how much panalty need to be paid ? Can anyone please help me.

Thanks in Advance

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Every person, liable to pay the service tax & who fails to do so .shall pay simple interest @ 13% per annum. for the period from the first day after the due date till the date of payment of any defaulted service Tax amount. & addition to such tax and interest a penalty which shall not be less than Rs.200/- for every day during which such failure continues or @ 2% of such tax per month, whichever is higher.would be charged
However, the penalty shall not exceed the amount of Service Tax payable.

Pls correct if i m wrong.

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DAYANANDA K N (ACCOUNTS EXCECUTIVE) (575 Points)
Replied 26 September 2011

Interest

Interest on delayed tax payment u/s 75 @ 18% p.a. (No. of days of delay) and 15% for the asessee whose turnover is upto Rs. 60 Lac.

Penalty

Penalty for failure to pay service tax u/s 76 - Min. Penalty 1% per month or Rs. 100/- per day which ever is higher, maximum penalty 50% of tax

amount w.e.f. 1.4.2011.

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Shaik ( M.com,IC(W)AI - Inter) (723 Points)
Replied 26 September 2011

Dear Pooja ,

Thank you for Reply, but jest i found pupdated.

The Interest liability is amplified in all the sections of custom, excise and service tax to 18% as from earlier of 13% per annum from this budget. This is one of highest increase in the rates of interest ever. In Central Excise the notification no. No. 6/2011-Central Excise (N.T.) dt. 01.03.2011 has brought an amendment for the purpose of the section 11AB of the Central Excise Act, 1944 by fixing the interest rate at 18% p.a. The similar amendment is made in the section 75 of Service Tax Act vide notification No. 14/2011-Service Tax dt. 01.03.2011 and 15/2011-Service Tax dated 01.03.2011 in which also the rate of interest is increased to 18% p.a. from 13% p.a. The new rate of interest of 18% will be applicable from 1st April, 2011.

Besides this some sort of relief is proposed in finance bill by inserting a proviso to section 73B. The detailed proviso can be read as under-

“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 issued under sub-section (3) of section 73A or during the last preceding financial year, as the case may be, such rate of interest shall be reduced by three percent per annum.”

So the reduced interest rate of 15% (18%-3%) will be applicable in case where the value of taxable services provided in a financial year is not more that Rs. 60 lakh. But this provision will have a limited application as only to the small service providers but no relief to the large tax payers has been provided. Although the interest rate is increased after a long period in excise section but the sudden increase of 5% will be proved killing in the indirect taxation.