Dear Expert
We are the manufacturer of excisable goods. Our payment terms with customer is on or before despatch of goods. But some of our customer making payment after despatch of goods. However we are collecting Interest through debit note for the days from the despatch of goods.
My question is whether we need to pay duty/tax for the interest amount received from customer for overdue payments.
Regards
Vivekanandhan
Interest on Late Payments Not Subject to Excise Duty or Tax, Experts Confirm for Excisable Goods Manufacturer A manufacturer of excisable goods inquired whether duty or tax is required on interest collected from customers for overdue payments. The payment terms specify payment before dispatch, but some customers pay afterward, incurring interest through debit notes. An expert clarified that the interest collected is due to late payment, not the sale itself, and therefore, no duty or tax is applicable on the interest amount. Another expert agreed, confirming that neither excise duty nor service tax applies. The query was acknowledged and appreciated by the inquirer. (AI Summary)
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