CALCULATION OF INTEREST ON DELAYED PAYMENT

[PARVEEN ARORA]

What is the rate of interest on delayed payment if we paid service tax for the month of March-2016 on 10.09.2016

[KASTURI SETHI]

Sh.Arora Ji,

Peruse Notification No.12/14-ST dated 10.7.14 with Notification No.13/16-ST dated 1.3.16 effective from the date of enactment i.e. 14.5.16

[CSSANJAY MALHOTRA]

Endorsed views of Sh, Kasturi ji.

Hopefully the service tax payable for Mar'16 has not been shown in the Service Tax Return submitted for period Oct'15-Mar'16.

[Ganeshan Kalyani]

Sir, the rate of interest is reduced to 15%. Thanks.

[CSSANJAY MALHOTRA]

Sometimes assessee submits the return correctly shown the service tax as payable and deposits service tax later on to avoid penalty on account of suppression, then the interest is to be paid @ leviable on the date of debit / payable entry.

[KASTURI SETHI]

Yes Sir. It means both Notifications are relevant for the party.

[Venkataprasad Pasupuleti]

For the delay upto 14.05.2016 - Rate is 18%

For the delay after 14.05.2016 -

- 15% if unpaid service tax was not collected from customer

- 24% if unpaid tax collected from customer but not paid

[Ganeshan Kalyani]

Sri Venkata ji, welcome to TMI.

My query to you is - if the short payment of service tax pertaining to last year is pointed out by auditor in this month, then whether interest rate of that period to be followed or the interest rate prevailing currently would apply. Awaiting for your reply. Thanks.

[Venkataprasad Pasupuleti]

Dear sir,

Interest rate shall be applied as existed during the delayed period and the delay may be for whatever reasons (i.e. voluntarily delayed or known only after pointing out by auditor etc.,). in the given case, delay is continuing from Mar' 16 at that time interest rate is 18% (since delay <6M) and new interest rate is made effective from 14.5.16 and not prior to that.

[DR.MARIAPPAN GOVINDARAJAN]

The views of Venkata Prasad are correct.

[Ganeshan Kalyani]

Keep it up Sri Venkata Ji. And thanks for your reply.

AI Summary

Interest on delayed service tax payments varies by delay period and whether tax was collected, with reduced rate after notification.
Interest on delayed service tax is computed by applying the rate in force during each period of delay: the earlier higher rate for delays up to the notification's effective date, and thereafter a reduced rate for unpaid tax not collected from customers and a higher post notification rate where tax was collected but not remitted; the applicable rate follows the delay period irrespective of how the shortfall was discovered.