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Interest is levied on the assessee when he delays the payment of service tax which is due and payable.
If payment of service tax is delayed in accordance with the provisions of Section 68, Interest is charged at the rate not below ten per cent and not exceeding thirty-six per cent per annum. (Please Refer : Section 75 of Finance Act, 1994)
If payment of service tax is withheld in accordance with the provisions of Section 73A, Interest is charged at the rate not below ten per cent and not exceeding twenty-four per cent per annum. (Please Refer : Section 73B of Finance Act, 1994)
At Present : Simple interest @ 13% p.a. is charged for the delayed period in respect of Section 75 as well as Section 73B.
If the assessee deposits the Service Tax by cheque, the date of presentation of cheque to the bank shall be considered as date on which Service Tax has been paid subject to realization of that cheque. [ Please Refer : Service Tax Rules, 1994. Rule 6(2A) ]
How to calculate Interest?
ILLUSTRATION :
Service Tax to be paid is Rs. 10000 for the month of July
Cheque Deposited in Bank 17th October
Cheque Realised on 20th October
CALCULATION :
Rate of Interest is 13% p.a.
Amount of service tax to be paid is Rs.10,000/-
Due date for the month of July would be 5th August. Thus upto 5th August no interest is to be charged
| Days for which Tax Payment is Delayed = |
August |
26 Days (31-5) |
|
September |
30 Days |
|
October |
17 Days (not 20) |
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Total |
73 Days |
Interest is to calculated as under
Service Tax to be paid X Int. Rate / 100 X No. of Days / total no. of days in a year
= Rs.10,000 X 13% X 73/365
= Rs. 260/- (Amount of Interest)
| Thus Total Payment to be made is |
Rs. 10,000/- (Tax Liability) |
| Add : Interest for Delayed Payment |
Rs. 260/- |
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| Total Payment to be made is |
Rs. 10,260/- |
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