TaxTMI 
TaxTMI 
A NBFC is financing Motorcycles , under hypothecation agreement , all income receipts are accounted as Interest income .Whether they are subject to service tax ? As banks are exempt , so they should be.
Service tax on Interest on Hypothecation
26 Dec 2012 
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Service tax on interest income: NBFCs financing under hypothecation may not enjoy bank exemption and should verify notifications.
Interest receipts of an NBFC from motorcycle finance under a hypothecation agreement are prima facie subject to service tax because the statutory exemption available to banks for the interest portion does not automatically apply to NBFCs; the payer should verify the negative list and applicable exemption notifications to determine taxability. (AI Summary)
Interest receipts of an NBFC from motorcycle finance under a hypothecation agreement are prima facie subject to service tax because the statutory exemption available to banks for the interest portion does not automatically apply to NBFCs; the payer should verify the negative list and applicable exemption notifications to determine taxability. (AI Summary)