Collection of Interest on delay payment from customer

[Vivek anandhan]

Dear experts,

We are the manufacturer of Excisable goods and are collecting interest through debit note from our customer on account of delay payment for our Excise duty suffered goods.

Whether we need to collect service tax or excise duty for said interest amount.

Vivekanandhan

Sunbeam

[Rajagopalan Ranganathan]

Dear Shri. Vivekanandan,

You are collecting interest for delayed payment of amount charged by you in your invoice under which the excisable goods are supplied to your customer. Such interest will not be treated as additional consideration under Section 4 of Central Excise Act, 1944. therefore you need not include such interest in the assessable value and pay central excise duty on such interest.

Collecting interest for delayed payment of invoice value by you customer cannot be treated as provision of service. If you collect any service charges for the same then you have to pay service tax.

[Mahir S]

There is no need to either collect excise duty or service tax for collection of interest amount.

The reply furnished above is proper and correct.

[Vivek anandhan]

Thanks for the reply and it is clear

AI Summary

Collection of interest on delayed payment is not part of assessable value and does not attract excise duty; service tax applies only to separate service charges.
Collection of interest for delayed payment on supply of excisable goods does not form part of assessable value for central excise and is not liable to excise duty; interest recovered is post-transaction compensation. Interest alone does not constitute a taxable service, though separately charged service or collection fees would attract service tax.