Tuesday, 5 August 2014

[Video] Service tax amendmend 2014 - Interest on delayed payment

This Video by +Adarsh Madrecha and +Ashish Badala  in short gives updates about what are the changes in Interest rate on delayed payment of service tax

Interest rate on delayed payment has been increased from 18% to 30%. But this increased interest rate is on slab basis. 

Interest has to be paid if the assessee does not make the payment of service tax by the due date. Due date for payment of service tax is 6th of the succeeding quarter (in case of individual or Partnership firm) or Month (in case of Others)

The Payment Schedule has been summarized below for your ready reference

Due Date
Paid Physically
Paid Online
Individual/Partnership Quarterly 5th of the Following Quarter 6th of the Following Quarter
Others Monthly 5th of the Following Month 6th of the Following Month
Since budget 2014 has made online payment compulsory "5th" now becomes redundant.

Interest rate earlier was 18% pa simple interest. This was irrespective of the period of delay.

Now interest rate is divided into 3 slabs based on period of delay. 

  • 18% - For first 6 months
  • 24% - For more than 6 months to 1 year
  • 30% - For more than 1 year.
This shall cause genuine hardship to tax payers if the service tax dues are contested at Adjudication or Tribunal or Court. As they will have to pay 30% interest now as the case in almost 100% of cases takes more than 1 year to have final verdict.

The penalty clause (which was same earlier) is levied similar like interest. Penalty is levied at 1% per month (that comes to 12% pa). Thus making total liability to increase at the rate of 42% (30% interest + 12% penalty)
Only Silver lining is that penalty is restricted to 25% of service tax liability.

The more shocking news is that, no one (Political party or Professional Institution or Trade body) has agitated on such a move by the government or not even shown a concern towards this.

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