Applicability of Service tax on Over due Interest Received from Customers

[A Wilson]

Sir,

Recovery of Over due Interest comes under Service tax Net? Please give your opinions on this issue with relevant Staturoty Reference.

[YAGAY andSUN]

No service tax will be applicable on interest.  Please check the Negative list, Taxation of Servcies :- An Education Guide, and Mega Notification in this regard.

[A Wilson]

Sir

Thanks for your reply.

As per Sec.66D(n)(i) - Services by way of Extending Loans in under the Negative List.

But Shall we taken Delayed Payment Interest as a Loan given to Customer? Is It Right?

Please give your inputs.

[YAGAY andSUN]

Kindly refer Rule 6 of the Valuation Rule :- Interest for delayed payment of any consideration for the sale of goods or provision of service has been specifically excluded.

[A Wilson]

Thank You Sir

AI Summary

Service tax on interest not leviable where delayed payment interest is excluded under valuation rules. Recovery of overdue or delayed payment interest from customers is not subject to service tax. The Negative List exemption for services by way of extending loans does not mean delayed payment interest should be treated as a loan service. Rule 6 of the Service Tax Valuation Rules specifically excludes interest for delayed payment of consideration for sale of goods or provision of services from the taxable value.