There is much confusion about calculating the interest on Service Tax liability. Even the Audit Commissionerates of Service Tax department are calculating the interest by applying different methods of calculations, each resulting in different amount of interest payable under section 75 of the Finance Act, 1994.
Interest on late payment of service tax was introduced vide Notification No. 26/2004-ST dated 10.09.2004. The simple rate of interest @13% per annum was payable under the said Notification No. 26/2004-ST dated 10.09.2004. This notification was amended vide Notification No. 14/2011-ST dated 01.03.2011(effective from 01.04.2011) revising the rate of interest to 18% per annum.
The Notification No.12/2014-ST dated 11.07.2014 effective from 01.10.2014 superseded Notification No. 26/2004-ST and prescribed three rates of simple interest-18% for the first six months, 24% for the next six months and 30% for the period beyond one year.
Notification No. 12/2014-ST, dated 11.07.2014, uses the words “delayed payment of service tax” and in table uses the words “period of delay”. Now delay will be calculated from the due date only and the three slabs of period are to be made starting from due date. Table is reproduced below-
|
Sl.No |
Period of delay |
Rate of simple interest
|
|
(1)
|
(2)
|
(3)
|
|
1 |
Up to six months |
18 per cent |
|
2 |
More than six months and up to one year |
18 per cent for the first six months of delay and 24 per cent for the delay beyond six months. |
|
3 |
More than one year |
18 per cent for the first six months of delay; 24 per cent for the period beyond six months up to one year and 30 per cent. for any delay beyond one year. |