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Budget 15-16 proposals: Amendments in sections 73, 76 and 78 (all related to penalty)Budget 15-16 proposals: Insertion of transition provision by way of section 78BBudget 15-16 proposals: Omitting section 80 (provided for waiver of penalty)Extending the scope of advance rulings to resident firms, with immediate effect (from 1.3.2015)Amendment in reverse charge mechanism, with immediate effect (from 1.4.2015)To prescribe full reverse charge on manpower supply and security service provided by individual, HUF, partnership firm to a body corporate, with immediate effect (from 1.4.2015)Prescribing reverse charge on service provided by a mutual fund agent, mutual fund distributor and agents of lottery distributor, with immediate effect (from 1.4.2015)Amendments in section 86 (remedy against the order passed by commissioner (Appeals) in a matter involving rebate of service tax shall lie in terms of section 35 EE of the Central Excise Act)Amendments in the provisions relating to Settlement CommissionShifting the liability of payment of service tax on aggregator of a service where service is provided under the brand name of the aggregator, with immediate effect (from 1.3.2015)Amendments in rules 4 (prescribing documentation, time limit and procedure for registration)Registration for single premises shall be granted within two days of filing the applicationProvisions for issuing digitally signed invoices and maintaining of records in electronic form added in rules 4A and 5 of the Service Tax Rules, 1994, with immediate effect (from 1.3.2015)The period for taking Cenvat Credit is being extended from six months from the date of invoice to one year from the date of invoice.Cenvat Credit allowed on input and capital goods received directly by job workers. ‘Export goods’ and ‘Exempt goods’ defined. New exemptions for,- (a) Precondition, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables (b) Service by a Common Effluent Treatment Plant operator (c) Varistha Bima Yojana (d) Ambulance services (e) Admission to a museum, zoo, national park, wild life sanctuary, and a tiger reserve (f) Service provided by exhibitor of movie to a distributor or an AOP consisting of exhibitor as one of its member (g)Transport of export goods by road from the place of removal to a laChange in abatement rates and conditions thereof for transport of passengers and goods by train; transport of goods by road by a GTA; transport of goods by vessels; executive/business class travel by air; and withdrawal of abatement on services provided in relation to chit, with immediate effect (from 1.4.2015) Amendment in reverse charge mechanism, with immediate effect (from 1.4.2015) To prescribe full reverse charge on manpower supply and security service provided by individual, HUF, partnership firm to a body corporate, with immediate effect (from 1.4.2015) Prescribing reverse charge on service provided by a mutual fund agent, mutual fund distributor and agents of lottery distributor, with immediate effect (from 1.4.2015)Amendment in rule 4(7) of the Cenvat Credit Rules to allow credit of service tax paid by recipient of service in partial reverse charge immediately on payment of tax ,with immediate effect (from 1.4.2015)Service Tax to be levied on service by way of access to amusement facility (amusement parks, water parks , theme parks etc)Service Tax rate is increased from 12.36% to 14%. New rate shall come into effect after the enactment of the Finance Bill, 2015. Notification No. 42/2012-ST is being rescindedSwachh Bharat Cess- Govt. to impose cess on all or any taxable service at the rate of 2% of the value of taxable serviceWe are committed to implementing a state of the art indirect tax system, the Goods and Services Tax, from April 1, 2016 - Finance MinisterNow issuing of Digital Invoices recognised in Service Tax.The term “government” defined Section 65B(26A)Section 80 providing waiver from penalty is proposed to be omitted.
Interest Rates
Interest Levied on Assessee

Landmark Service Tax Judgment - Interest Rates

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)

Till 31.03.2011 simple interest @ 13% p.a. is charged for the delayed period in respect of Section 75 as well as Section 73B. However, by budget 2011-12 vide Notification no. 14/2011- ST, dated 01/03/2011 the effective rate of interest is increased from 13% to 18%. Benefit 3% is provided where turnover of any assessee is up to Rs.60 lakhs, therefore such assessee is liable to pay interest at 15% per annum. Such change of rates are in force with effect from 01.04.2011.

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 18% 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)

----------------------------------------------------

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 18% X 73/365 

= Rs. 360/- (Amount of Interest)

 

Thus Total Payment to be made is Rs. 10,000/- (Tax Liability)
Add : Interest for Delayed Payment Rs.      360/-

--------------------
Total Payment to be made  is Rs. 10,360/-
 
Other Issues related with Interest on Delayed Payment of Service Tax

No Interest of Service Tax is to be charged for the period if any competent authority has levied Stay on the proceedings.

Show Cause Notice must be issued u/s 73 of the Finance Act 1994 for demand of Service Tax and Interest.

 
Earlier Rates of Interest
Period prior to 16.07.2001 1.50% per month or part there of
16.07.2001 to 15.08.2002 24% per annum
16.08.2002 to 09.09.2004 15% per annum
10.09.2004 to 31.03.2011
13% per annum Notification No. 26/2004-ST dated 10.09.2004
With effect from 01.04. 2011

18% per annum : Notification No. 14/2011- ST, dated 01/03/2011-

If turnover of any assessee is up to Rs.60 lakh, such assessee is liable to pay interest at 15% per annum

 
Interest on Delayed Refunds of Service Tax

If delay in refund of service tax is for more than 3 months from the date of receipt of refund application, Interest is paid by the Government at the rate not below five per cent and not exceeding thirty per cent per annum. (Please Refer : Section 11BB of Central Excise Act, 1944)

At Present : Simple interest @ 6% p.a. is granted on delayed refunds.

 

Case Laws Related

  • STO 2013 CESTAT 75
  • Interest: Delayed Refund under Notification No. 17/2009: Section 11BB applicable to Finance Act, 1994 by virtue of Section 83.

  • STO 2013 CESTAT 51
  • Interest: Delayed refund under Notfn. No. 41/2007-ST: Admissible as Section 11BB is applicable to Finance Act, 1994 by virtue of Section 83 thereof.

  • STO 2013 CESTAT 151
  • Interest: Refund: Delay in sanctioning refund even though department did not file appeal against Order from which the refund arises: Liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made.

  • STO 2012 CESTAT 979
  • Interest: Delayed refund: appellant is eligible for the interest after three months of filing of the refund claim with the authorities till the same was sanctioned to the appellants.

  • STO 2012 CESTAT 976
  • Interest: Delayed refund: Appellant held eligible for interest on refund after 3 months from the date of filing refund claim and not from the date when the order was passed by higher appellate forums.

  • STO 2012 CESTAT 763
  • Interest: As per section 75 interest payable from the due date till actual date of payment: Appellant had not put in place system by which tax is due for each month and no reasonable cause is adduced for such failure for prolonged period. So the appellants are liable to penalty under section 76.

  • STO 2012 CESTAT 327
  • Interest: Cenvat Credit wrongly taken not utilized: Interest Payable.

  • STO 2010 CESTAT 609
  • Service Tax: Interest liability under Section 75 of the Finance Act, 1994: Scope: As per Section 75 of the Finance Act, 1994, every person, liable to pay tax who fails to credit the tax or any part thereof to the account of the Central Government within the prescribed period, shall pay simple interest at a rate not less than 10% and not in excess of 36% p.a. The assessee paid service tax by way of debit in CENVAT credit amount and later on made good the error by making payment in cash. Therefore, Commissioner (Appeals) has correctly held that this is not a case of failure to make payment but only an adoption of an incorrect method for payment, and therefore, the provisions of Section 75 are not attracted against the assessees.(Para 2).

    Revenue appeal rejected.

  • STO 2009 CESTAT 450
  • Service Tax: Waiver of pre-deposit and stay: There is no representation for the party despite notice, nor any request for adjournment. The original authority imposed a penalty on the party but the latter had no objection. Hence, the appellant is directed to make pre-deposit under Section 35F of the Central Excise Act, as applicable to defaulters of service tax.(Para 2).

    Pre-deposit ordered.

     
     

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