You are here
As per Section 75, simple interest at a rate not below 10% p.a. but not exceeding 36% p.a. as may be notified by the Central Government may be charged
Interest rate depends upon period of delay as per Notification No. 12/2014 ST dated 11.07.2014
|
Period of delay |
Interest rate charged |
|
Upto 6 months |
18% |
|
6 months to 1 year |
First 6 months 18% Remaining period 24% |
|
More than 1 year |
First 6 months 18% Next 6 months 24% Balance period 30% |
* There is 3% concession if value of taxable service provided in a financial year does not exceed 60 lakh
Change in amount of interest:
Where the amount determined by the Central Excise Officer under section 73A is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal, or the Court, the interest payable thereon under this section shall be on such reduced or increased amount.
Period for which interest would be charged:
The interest shall be payable from the first day of the month succeeding the month in which the amount ought to have been paid till the date of payment of such amount.
Exam Questions
Question 16
Determine the interest payable under section 75 of Finance Act, 1994 on delayed payment of
service tax from the following particulars:
| Service tax payable | Rs. 60,500 |
| Due date of payment | 06.10.2014 |
| Date of payment | 31.10.2015 |
Note: Turnover of services in the preceding financial year was ` 80 lakh.
View Answer
Section 75 of Finance Act, 1994 levies simple interest on failure to pay service tax by the
prescribed due date for the period by which such crediting of tax or any part thereof is
delayed. Interest payable under section 75 as per the prescribed slab rates of interest will be
computed as under:
Computation of interest payable under section 75
| Particulars | Rate of interest per annum | Interest () |
| Period of delay [07.10.2014 - 06.04.2015] | 18% for first six months | 5,445 [Rs. 60,500 × 18% × 6/12] |
| Period of delay [07.04.2015 - 06.10.2015] | 24% for next six months | 7,260 [Rs. 60,500 × 24% × 6/12] |
| Period of delay [07.10.2015 - 31.10.2015] | 30% for period beyond one year | 1,243* [RS. 60,500 × 30% × 25/365] |
| Total Interest | 13,948 |
Since the turnover of the services in the preceding financial year is more than ` 60 lakh,
concession of 3% on applicable rate of interest cannot be availed.
* Interest liability will work out to be Rs. 1260 when calculated by converting the period of delay
into months.
Question 17
Compute the interest payable on delayed payment of service tax by service provider in
following cases:
| Name of the service provider | PQR Ltd. | Mr. Manik |
| Service tax liability | Rs. 1,23,600 | Rs. 2,16,000 |
| Delay in payment of service tax | 20 days | 25 days |
Aggregate value of taxable services rendered in preceding financial year by PQR Ltd. was
Rs. 40,00,000 and by Mr. Manik was Rs. 62,00,000.
Computation of interest on delayed payment of service tax
| Name of the service provider | PQR Ltd. | Mr. Manik |
| Service tax liability | Rs. 1,23,600 | Rs. 2,16,000 |
| Delay in payment of service tax | 20 days | 25 days |
| Value of taxable services in previous financial year | Rs. 4000000 | Rs. 6200000 |
| Rate of interest | 15% per annum | 18% per annum |
| Interest (rounded off) | [Rs. 1,23,600 x (15/100) x (20/365)] = Rs. 1,016 | [Rs. 2,16,000 x (18/100) x (25/365)] = Rs. 2,663 |
Note: As per section 75 of Finance Act, 1994 read with Notification No. 12/2014 ST dated
11.07.2014, delay in payment of service tax upto six months attracts interest @ 18% per
annum. However, the applicable rate gets reduced by 3% for service providers whose
turnover of services does not exceed Rs. 60 lakh in the preceding financial year.
