What Are the Penalties for Late Payment of Service Tax?

Service tax is an indirect tax that applies to services provided by any service provider. It is important for all service providers in India to be aware of the service tax and the potential penalties for late filing of a service tax return. Under the previous provision, fines for late payment of service tax used to be 100 rupees a day or 1% per month, whichever is higher. However, under the new provision, 75% of the fine can be waived if the payment of the service tax and the interest due are paid within 30 days of the order.

The late penalty is 0.5% of the tax due after the due date; for each month or part of a month in which the tax remains unpaid, up to 25%. You won't have to pay the fine if you can show reasonable cause for not paying on time. No penalty will be imposed if the person presented a check in good faith and with reasonable reason to believe that it would be duly paid. Penalties may be suspended or reduced in whole or in part if the declarant demonstrates that failure to submit the application in the correct format is due to reasonable cause and not to deliberate negligence.

If a taxpayer can document that the failure to file a return or pay a tax in a timely manner is due to reasonable cause and not deliberate negligence, DOR can reduce the penalties imposed under the law. In addition, if there are errors to correct or if an already filed service tax return form needs to be omitted, the taxpayer must file a new revised service tax return form within 90 days of the filing date of the original service tax return form. In case of fraudulent attempt to evade or delay payment of service tax, a minimum fine of 100% of the tax obligation on services will be applied. If an evaluee believes that he has been unfairly charged, he must submit evidence or evidence that shows that non-payment or evasion of service tax was carried out without any malevolence.

It is important to note that reduction of late interest is not discretionary and DOR does not have authority to reduce interest accrued on unpaid taxes or late payments. Therefore, it is essential for all service providers in India to understand their obligations regarding service tax and ensure timely payment and filing of returns in order to avoid any penalties.

Kirk Streets
Kirk Streets

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