SERVICE TAX ON INTEREST

[Subodh Sharma]

Section 66D (n) of the Act inter-alia provides that services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or deposit. Interest has been defined under section 65B(30) of the Act to inter-alia mean interest payable in any manner in respect of any moneys borrowed or debt incurred including a deposit, claim or other similar right or obligation.

Thus, to get covered within the ambit of section 66D (n) of the Act, the activity should be in the nature of extending a deposit, loan or advance for which consideration should be paid in the form of interest. In other words, any amount paid as interest in respect of an activity which does not fall within the specified list of activities shall not get covered under negative list and accordingly shall be chargeable to service tax.

Discussions to this article

[MAHENDRABHAI DESAI]

Dear Sir,

value of any taxable service does not include interest on delayed payment or any consideration for the provision of service or sale of property, whether moveable or immoveable as per Rule 6 sub section 2 (iv) pf service tax determination of value rules, 2006.

Therefore interest on delayed payment is not to be included in taxable value for service tax.

Regards,