When liability to pay interest arises in respect of service tax payment
service Tax is an indirect tax i.e, it is collected from the service receiver and paid to the government.
The service tax law also warrants the payment of service tax after collection of the same from the buyer. In case of proprietorship and partnership firm, the service tax collected is to be deposited to the government account on or before the 5th day of the month following the quarter for which the service tax is payable.
That is service tax for the quarter ending April-June is payable on or before 5th of July, for the quarter July-September is payable on or before 5th October, for the quarter October to December on or before 5 th of January.
The Exemption is for the quarter ending March, where service tax has to be paid on or before 31 st of March itself.
For those service providers who are other than individual, proprietary or partnership firm, service tax is payable by 5th of the next month.
However in this case also for the month of March payment has to be made on or before 31 st of March.
Even though the tax is collected and paid there are many cases where service tax is not paid on or before the due date. This may be due to ignorance or because of cash crunch etc.
Wherever late payment of service tax is made the law provides for payment of interest.
The service tax law also warrants the payment of service tax after collection of the same from the buyer. In case of proprietorship and partnership firm, the service tax collected is to be deposited to the government account on or before the 5th day of the month following the quarter for which the service tax is payable.
That is service tax for the quarter ending April-June is payable on or before 5th of July, for the quarter July-September is payable on or before 5th October, for the quarter October to December on or before 5 th of January.
The Exemption is for the quarter ending March, where service tax has to be paid on or before 31 st of March itself.
For those service providers who are other than individual, proprietary or partnership firm, service tax is payable by 5th of the next month.
However in this case also for the month of March payment has to be made on or before 31 st of March.
Even though the tax is collected and paid there are many cases where service tax is not paid on or before the due date. This may be due to ignorance or because of cash crunch etc.
Wherever late payment of service tax is made the law provides for payment of interest.
What is the interest rate for late payment under service tax law
The rate of interest is 13% per annum as on date for delayed payment of service tax.
However the interest rate was different for earlier periods.
From 16.8.2002 to 09.09.2004 it was 15% and before that 24% from 16.7.2001. From 10.09.2004, it remains at 13%.
So if your calculating interest for a period before 10.09.2004, you have to apply the prescribed rate for that period.
The interest prescribed at 13% rate is for one full year and if the delay is less than one year or for part of a year, then the number of days has to be calculated for arriving at the interest payable.
However the interest rate was different for earlier periods.
From 16.8.2002 to 09.09.2004 it was 15% and before that 24% from 16.7.2001. From 10.09.2004, it remains at 13%.
So if your calculating interest for a period before 10.09.2004, you have to apply the prescribed rate for that period.
The interest prescribed at 13% rate is for one full year and if the delay is less than one year or for part of a year, then the number of days has to be calculated for arriving at the interest payable.
How to calculate interest for delayed payment of service tax.
To calculate the interest you should know three things.
The first is the amount of service tax not paid. The second is the rate of interest payable for the particular period. and the third one is the number of days delayed.
To calculate the number of days delayed, you should know the date on which the service tax should have been paid and the actual date of payment of the service tax.
Let us take an example
A an individual paid the tax of Rs.10,000/- pertaining to the month of March 2009 on 6 th June.what is his interest liability.
As I already said we should know three things to work out the tax liability. The amount paid late is Rs.10,000. The rate of interest is 13%.
To calculate number of days delayed we should know the date on which service tax need to be paid and the date of payment.
The date of payment in this case is 6th June. The date on which tax is payable is March 31. Therefore the number of days between March 31 to June 6 should be calculated.
For calculating the number of days the date on which the tax is to be paid is not to be included but the date on which tax is paid is to be included.
Therefore the number of days delayed comes to 67 days. ( April 30 days +May 31 days + June 6 days). Now we have all the details and we only need to apply this to the following formula.
Interest payable = Amount not paid X( No.f of days delayed/365) X 0.13.
Interest payable = 10,000 X (67/365) X 0.13 =Rs.239/-
The first is the amount of service tax not paid. The second is the rate of interest payable for the particular period. and the third one is the number of days delayed.
To calculate the number of days delayed, you should know the date on which the service tax should have been paid and the actual date of payment of the service tax.
Let us take an example
A an individual paid the tax of Rs.10,000/- pertaining to the month of March 2009 on 6 th June.what is his interest liability.
As I already said we should know three things to work out the tax liability. The amount paid late is Rs.10,000. The rate of interest is 13%.
To calculate number of days delayed we should know the date on which service tax need to be paid and the date of payment.
The date of payment in this case is 6th June. The date on which tax is payable is March 31. Therefore the number of days between March 31 to June 6 should be calculated.
For calculating the number of days the date on which the tax is to be paid is not to be included but the date on which tax is paid is to be included.
Therefore the number of days delayed comes to 67 days. ( April 30 days +May 31 days + June 6 days). Now we have all the details and we only need to apply this to the following formula.
Interest payable = Amount not paid X( No.f of days delayed/365) X 0.13.
Interest payable = 10,000 X (67/365) X 0.13 =Rs.239/-
