Interest for late payment of service tax
Why there is interest provision – when assessee withheld the amount of tax with him even if it become due and payable then interest is imposed on assessee. Interest is compensatory in nature and different from penalty.
The due date for payment of service tax is 6th day of the month following the relevant month/quarter, if electronically paid and in other cases, 5th day of the month following the relevant month / quarter. If the assessee does not make the payment of service tax on right time i.e. on or before due date then he will be liable for the interest @18 per annum.
It is provided under section 75 of the Finance Act, 1994 that in case of delayed payments (after due date) the assessee is required to pay simple interest at the rate prescribed i.e. @18 % p.a.
In case of small service providers whose value of taxable service did not exceed Rs. 60 Lakh during any of the last or current financial year the rate of interest shall be reduced by 3% per annum, Thus in their case, rate of interest would be 15% from.
Calculation of interest for late payment of service tax should be made on day basis i.e. from the due date of payment to actual date of payment and not on monthly basis. So interest is imposed on actual days of default. If there is delay for part of the month then interest would be imposed after calculating the days of delay.
Payment of interest is mandatory in nature if imposed i.e. it cannot be waived or reduced. And there is no specific notice is required for the payment of interest.