Interest on Service Tax

[Guest]

Sir,

The rate of Interest @ 15% per year in case of delayed payment of Service Tax. Whether it mean that interest to be apid @ 1.25% per Month or irrespective of period of delay Interest @ 15% is to be paid.

For example, Liability for the Month of March is to be paid by 31st march itself. if we pay it on either 5th or 6th of April what shall be the rate of Interest to be paid?

[Himansu Sekhar]

The interest rate is calculated on yearly basis and accordingly one year is taken as 365/366 days. You can calculate the no. Of days delayed which will include the day of payment but excluding the due date of payment. It is easy to calculate now. If its paid on 6th, there is 6 days delay. Total amount multiplied by 0.15 and 6 , then divided by 365 will give your desired amount.

If it crosses 6 months or one year, the rate will be different

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Himansu

[KASTURI SETHI]

The benefit of 3 % is available under Section 75 of the Finance Act. Nicely explained by Sh. Himanshu Sha, an expert.

[Himansu Sekhar]

Thanks very much

AI Summary

Interest on service tax calculated pro rata daily; delayed payments accrue interest based on days delayed and computation rules. Interest on service tax is computed pro rata on an annual rate using a 365/366 day year; days of delay include the payment date and exclude the due date. The interest equals the taxable amount multiplied by the annual rate and the number of delayed days, divided by the year days. Extended delays may attract different rate consequences. Section 75 offers a specified percentage benefit relevant to liability assessment.