TaxTMI 
TaxTMI 
Sir,
Recovery of Over due Interest comes under Service tax Net? Please give your opinions on this issue with relevant Staturoty Reference.
Applicability of Service tax on Over due Interest Received from Customers
29 Aug 2012 
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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. (AI Summary)
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. (AI Summary)