Interest on Delayed Payment of service tax is changed by Budget 2016-2017 for the Financial year year 2016-17.
I have also presented the earlier years Interest on delayed payment in this post.
The interest rate was so high that it was the demand of the industry to reduce the interest rate, accordingly the interest rates are reduced.
Financial Year 2016-17
| Conditions | Rate of Interest |
|---|---|
| Service Tax collected but not deposited to the exchequer | 24% |
| Other Cases | 15% |
If in case the value of taxable services of preceding year does not exceeds Rs. 60 Lakhs, then the rate of interest on late payment will be 12%.
[The above changes will come into effect on the day the Finance Bill receives the assent of the President.]
Financial Year 2014-15 & 2015-16
The rate of interest was simple interest @18%p.a upto 30th Sept 2014.
The following interest on delayed payment of service tax will be applicable from 1-10-2014-
| Period of delay | Rate of simple interest |
|---|---|
| Upto 6 month | 18% p.a. |
| More than six month and up to 1 year | 18% p.a. for the 1 st six month of delay and 24% p.a. for the delay beyond 6 months. |
| More than a year | 18% p.a. for the 1 st six month of delay and 24% p.a. for the delay beyond 6 months. |
| More than a year | 18% p.a. for the 1 st six month of delay + 24% p.a. for the period beyond 6 month upto 1 year + 30% p.a. for any delay beyond one year |
Reduced rate in certain cases:
However ,in the case of a service provider , whose value of taxable services provided in a financial year does not exceed Rs 60 lakhs –
- During any of the financial year covered by the notice ; or
- During the last preceding financial year ,as the case may be ,
Such rate of interest shall be reduced by 3% p.a. i.e. the aforesaid rate of interest, shall be reduced by 3% p.a and such rate of interest shall be 15% or 21% or 27% respectively.
In case where service tax become due, say on the 6th of sept, 2013 and the assessee pays the due on 6th of Jan , 2014, in such case interest to be charged would be as below:
- 18% simple interest upto September 30th , 2014
- For the period from 1st October,2014 to 6th Jan, 2014, the rate of interest will be 30% since the period of delay is beyond one year.
EXAMPLE:-
Mr. Ashok , an output service provider ,deposited the service tax amounting to Rs 50 lakhs on 06-03-2015 for the quarter ending September 2014. Compute the amount of interest payable by Mr. Ashok assuming he deposits the service tax electronically.
Solution: computation of amount of interest payable :
| Due Date for deposit of service tax [A] | 6th Oct 2014 |
| Date of payment of service tax [B] | 6th March 2015 |
| Period of delay (in days)[C=B-A] | 151 |
| Amount of service tax in Rs. [D] | 50 00 000 |
| Interest payable @ 18% p.a. for delay in payment of days[D × 18% × C ÷ 365 Days] | 3 72 329 |
Financial Year 2013-14
Interest leviable @ 18% p.a :
Every person, liable to pay service tax in accordance with the provision of sec 68 or rules made thereunder , 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 @ 18% p.a.(upto 30-09-2014) for the period by which such crediting of the tax or any part thereof is delayed.
Concession of 3% is there if the value of taxable services does not exceeds Rs. 60 Lakhs.