Applicability of service tax on interest on arrears charged

[Guest]

Whether Interest on arreears charged to member by Cooperative Housing Society, comes within ambit of service tax and service tax payable on the same?

[Surender Gupta]

There is not service tax on Interest received on financial activities. Once a payment becomes overdue and interest being charged on such overdue, such interest can not be taxed as per the provisions.

AI Summary

Interest on arrears charged by a cooperative housing society is not subject to service tax under the financial activity exclusion. Interest arising from financial activities, including interest on overdue payments charged by a cooperative housing society, does not fall within the ambit of service tax and therefore such interest is not taxable as a service.