Payment of Service Tax on Rent on Immoveable Property with Interest

[PAWAN KUMAR SHARMA]

As per the recent instructions from CBEC, we have to deposit service tax on Rent on Immovable component from last year (earlier we have not paid any service tax as per the stay of Superem Court)

My Question is

1. Whether any Interest for late deposit is applicable for the same (considering the stay by Supreme Court) ?

2. What is the rate of interest ?

3. Whether interest is to be calculated on per month basis or per day basis ?

4. Suppose, we have to pay Rent for the month of July 2010 for which Bill was raised on 07th of Aug'10 and payment was done on 20th of Aug'11, then how to calculate the amount of Service Tax payable along with interest payable if we have to deposit the same in this year i.e. Aug 2011 ?

[YAGAY and SUN]

Interest is statutory requirement and mandatorily required to be paid when service tax has not been paid within due time.

The Rate of tax was 13% earlier and 18% from 01-04-2011. Further, if the liability is less than 60 lacs then it will be 15% p.a.

Interest is required to be calculated from the last due date till the date of payment of tax .

[ROHAN THAKKAR]

Dear Sir,

As there has been retrospective amendment in the definition of renting of immovable property, consequently, interest is required to be paid from the date on which the service tax ought to have been paid.

The interst is required to be paid at 13% till 31-03-2011 and thereafter at 18%.However, if your turnover in the previous year of taxable services is less than 60 lakhs, then interest will be payable at 15% for period of delay (simple interest calculated on daily basis)

Your 4th question is not clear. Whether you are service provider or service receiver? Please clarify.

 

Regards,

Rohan Thakkar

9228720536

 

[NK SHETE]

My opinion is

1. Interest for late deposit is applicable for the same.

2. Rate of interest was  13 % up to 31.3.2011. By Finance Act 2011, two rates are prescribed depending on turn over.  The rate of interest is 18%.However  in the case  value of taxable services provided in a financial year does not exceed sixty lakh rupees during any of the financial years  or during the last preceding financial year, as the case may be, such rate of interest shall be reduced by three per cent. per annum

3. Interest is to be calculated on per day basis.

4. Ambiguity in question.

 

[PAWAN KUMAR SHARMA]

Regarding Question No. 4

 

This question I have queried as a service receiver and Service Provider is raising a Debit Note on us for service tax as well as Interest for delay in payment.

 

Kindly clarify.

[ROHAN THAKKAR]

Dear Sir,

 

If you are service provider, 

then, till 31-03-2011, service tax is required to be paid on receipt basis. From 01-04-2011, service tax is paid on accrual basis (For that, Point of taxation Rules, 2011 may be referred). However, as per your question, the service has been provided in July, 2010, hence, its tax is required to be paid as and when the amount of service has been paid. Accordingly, if the amount has been paid in August, 2011, then its service tax will have to be paid by 5th of the September, 2011 (if the service provider is a other than individual and proprietorship, else on 5th October, 2011 -- For e-payment, 1 extra day is given i.e., instead of 5th, the  amount is to be paid on 6th). In this case, no interest is required to be paid as the amount of July, 2010 has been received by service provider in August, 2011.

 

Service Receiver can receive credit of the amount paid, if it is otherwise admissible. 

Regards, 

Rohan Thakkar

9228720536

AI Summary

Interest on late service tax for rent of immovable property arises from the date tax was due, with tiered rates.
Interest on unpaid service tax for renting immovable property is payable from the date the tax ought to have been paid; it is calculated as simple interest for the delay on a per day basis. Interest rates are tiered with a concessional lower rate for small taxable turnover and a higher standard rate for others. Point of taxation rules determine whether tax is on receipt or accrual, affecting the due date; if the provider receives payment and remits tax by the applicable statutory due date (with e payment allowances), interest may not be payable. The service receiver can claim input credit if admissible.