Revised Rate of Interest on Delayed payment of Service Tax
Central Government vide notification No 12/2014-ST dated 11.7.2014 has increased the rate of interest chargeable on the late payment of service tax dues w.e.f. 1st October, 2014.
Earlier the rate of interest on the delayed payment of service tax was 18% p.a. irrespective of the time i.e. there was only one interest rate. But in budget 2014 has made changes in the rates as well as in the time period of payment of dues. Earlier even if the payment of service tax was made after 1 month or 1 year, the rate was same i.e. 18% p.a. but now the time slabs has been formed.
The interest rates on delayed payment of service tax as per budget 2014 are:
|S.No.||Period of delay||Rate of Simple Interest Per Annum|
|1||Up to six months||18 percent|
|2||More than six months and up to one year||18 percent for the first six months of delay; 24 percent for delay beyond six months|
|3||More than one year||18 percent for the first six months of delay; 24 percent for period beyond six months up to one year; 30 percent for any delay beyond one year|
Let’s understand the impact of the above change with an illustration.
Suppose there is delay of 17 months in payment of service tax dues of Rs.50,000 by the assessee. The amount of interest will be
Paid Before 1-10-2014
(payable on 1-04-2013 and paid on 1-09-2014)
Paid After 1-10-2014
(payable on 1-06-2013 and paid on 1-11-2014)
|Interest @ 18% p.a. for 17 monthsi.e. 50,000* 18% * 17 = Rs.12,750||Period upto 30-09-2014 i.e16 months * 18% * 50,000 = Rs.12,000
1 month * 30% * 50,000 = Rs.1,250
|Total Interest = Rs.12,750||Total Interest = Rs.13,250|
Points to keep in Mind:
- The new rate will be effective only on or after 1st October, 2014, upto 30th September, 2014 the old rate i.e. 18% p.a. will be applicable.
- The interest is simple interest not compounded interest.
- Concessional Rate of 3% for specified small service providers shall be available u/s 75.
- New rate structure will not be applicable to VCES (Voluntary Compliance Encouragement Scheme) cases as interest @ 18% p.a. is payable under the scheme which ends on 31 December, 2014.