Service Tax liability on Late payment charges

[Sanjeev Chauhan]

Respected All,

A service provider collect late payment charges from his customers, is he liable to pay service tax on such late payment charges?

Regards,

Sanjeev

AI Summary

Service tax not applicable on late payment interest per Rule 6, unless credited to miscellaneous or other income accounts. A service provider inquired about the liability to pay service tax on late payment charges collected from customers. One respondent referenced Rule 6 of the Service Tax (Determination of Value) Rules, 2006, indicating that interest on delayed payments is not included in the taxable value of services. Another participant clarified that if the interest is credited to an interest account, service tax is not applicable. However, if credited to miscellaneous receipts or other income accounts, service tax must be paid. The discussion concluded with appreciation for the provided guidance.