How to apply new Service Tax Interest Rate ??

[abbas mukhi]

Sir,

As the finance bill, 2016 is enacted on 14.05.2016, new rate of interest is also get effected.

how new rate of interest will be apply in for earlier transaction ??

Is there any provision in this regard...?

[Vijay kumar]

Dear Sirs,

Please refer Notification No.13/2016-ST prescribing the effective rate of interest under Section 75. it is clearly mentioned that the Notification comes into effect from the date it receives the assent of the President, which is 14.5.2016. That being the case, the rate of 15% comes into force only from 14.5.2016 and not from an earlier date. The Supreme Court judgements in the case of Suchitra Components 2007 (1) TMI 4 - SUPREME COURT OF INDIA or Mysore Electricals 2006 (11) TMI 202 - SUPREME COURT OF INDIA cannot be read into herein because those cases pertains to operation of a Circular/37B order, which are different from a Notification issued under the provisions of Finance Act.

A Notification has to be applied prospectively, unless otherwise expressly provided therein that it is retrospective, as per the following case laws:

i) Supreme Court of India – Videocon Industries Limited vs UOI - 2015 (2) TMI 735 - SUPREME COURT

(v) A Statute which not only changes the procedure but also creates new rights and liabilities, shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication.

ii) 2015 (10) TMI 296 - ALLAHABAD HIGH COUT- Commissioner of Service Tax, Noida Versus M/s Greater Noida Development Authority, Greater Noida

Other Citation: 2015 (40) S.T.R. 46 (All.)

Levy of service tax on letting out of vacant land in furtherance of business and commerce - w.e.f. 01.07.2010 or w.e.f. 01.06.2007 - Held that:- The findings of the tribunal in case of NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY Versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX [2014 (1) TMI 1203 - CESTAT NEW DELHI] Since the introduction of this sub-clause in Explanation I expands the scope of the taxable service and renders the taxable (a) hitherto non-taxable transaction, and absence of explicit retrospective reach provided to the amendment and insertion of this sub-clause, these transactions covered by this sub-clause of the Explanation have only the prospective operation.

iii) 2015 (3) TMI 964 - CESTAT CHENNAI

Other Citation: 2015 (39) S.T.R. 261 (Tri. - Chennai)

M/s. Sify Technologies Ltd Versus Commissioner Of Central Excise And Service Tax, LTU Chennai. Therefore, the addition to the Explanation (C) with effect from 10.05.2008 is prospective in nature and that addition shall be applicable from the day that was enacted in the statute book. Accordingly, there shall be no liability to levy of interest on the gross value of taxable service relating to the period prior to that date. - Decided in favour of assessee.”

NOTIFICATION No. 13/2016-Service Tax New Delhi, the 1st March, 2016 G.S.R.___ (E).-

In exercise of the powers conferred by section 75 of the Finance Act, 1994 (32 of 1994) and in supersession of the notification No. 12/2014-Service Tax, dated the 11th July, 2014, published in the Gazette of India, Extraordinary, vide number G.S.R. 482 (E), dated the 11th July, 2014, except as respects things done or omitted to be done before such supersession, the Central Government hereby, for delayed payment of any amount as service tax in the situation mentioned in column (2) of the Table below, fixes the rate of simple interest per annum mentioned in the corresponding entry in the column (3) of the said Table:-

2. This notification shall come into force on the day the Finance Bill, 2016 receives the assent of the President.

[F. No. 334/8/2016-TRU] (K. Kalimuthu) Under Secretary to the Government of India

[KASTURI SETHI]

Sh.Vijay Kumar Ji,

Let us have a discussion in sportsman spirit.

You are treading my path which I have left as is evident from above replies by the experts. Earlier, rate of interest was increased vide Notification No.12/14-ST dated 11.7.14 (effective from 1.10.14). As per TRU-letter dated 10.7.14, with an example higher rate of interest @18% was made applicable for the period from 5.2.13 to 30.9.14 where as effective date was 1.10.14. Will you call it retrospective effect or prospective effect ?

[Vijay kumar]

Sri Sethi ji,

18% interest was prevalent up to 30.9.2014. From 1.10.2014, the slab rates of 18, 24 and 30 came into force. The TRU letter clearly indicates that upto 30.9.2014 the rate of interest of 18% will apply, being the prevalent rate under the prevalent notification. From the 1.10.2014, the new rate will apply depending upon the period that has elapsed since the due date.

Accordingly, the interest notification will have a prospective application only, which has been my stand from the beginning.

Thanks and regards.

AI Summary

Service tax interest rate change applies prospectively from enactment; interest computed by period when tax was due.
Debate centers on whether the revised interest rate applies to earlier service tax demands when interest is paid after enactment. Notification No.13/2016 fixes the new rate and states it comes into force on assent of the Finance Bill; absent express retrospective language, the notification is applied prospectively. Consequently interest is to be computed by reference to the rate prevailing for each period when the tax was due, potentially segmenting liability across rate periods, although some judicial pronouncements were cited advocating application of the rate at time of payment.