18% interest on Service tax & VAT payment on property

POSTED BY Sachin W ON September 20, 2013 8:00 pm COMMENTS (4)


I have bought a under construction property and the agreement was registered in Nov 2012.  My down payment amount was paid to the builder before the registration and later the loan amount was paid by the bank as per the banks schedule.

Now builder is demanding 18% interest on Service tax & vat payment from the date of agreement. What he is saying is this interest charges are to be paid to the government. However he will not be providing any govt. receipt for this payment , but will provide his own receipt.

I have not made this payment to him yet. But without this, he wont give possession.

Is this interest charge valid? Is there any legal info to question the builder on the interest charges?




4 replies on this article “18% interest on Service tax & VAT payment on property”

  1. MANISH GUPTA says:

    Dear Sir,
    I booked a flat of value 3058550/- on 14/02/2015 and then give the 20% of value on 02/03/2015 3,14,550/- and on 21/03/2015 I gave service tax 16819/- ,vat=30580/- ,registration amount=1,83,200/- in panvel ,Navi Mumbai.
    after that builder was not in picture, and came on 30/07/2015 for the registration .after the registration demand letter from the builder and i gave the 98% completion amount on 31/10/2015 of 26, 31,829/- rupees and at the time of final disbursement of 61171/- rupees on 27/01/2016 he charge me fine of rupees around 3000/- rupees on service tax.
    And also increase the service tax calculation as below:
    AFTER 15 NOV 2015 SERVICE TAX RATE=3.62%
    SO (51000+314550=365550)365550*3.09%=11295.49/-
    TOTAL SERVICE TAX=108782.09/-
    RECEIVED SERVICE TAX =105624.12/-
    Can you please tell me whether these calculations are right or wrong when i gave the 2693000/- cheque on 31/10/2015 why they calculate like this and please tell till when there is no service tax interest in my case .
    Thanks,Manish Gupta-9820438443

  2. ashalanshu says:

    Dear Sachin, 3.13 is meant for cases, where partial payment has been done ans 3.15 is meant for non payment cases.



  3. Sachin W says:

    Thanks Ashal for the reply and the link.

    I understand that the taxes must have being paid by the builder already and now he is trying to earn some extra bucks by charging the interest.

    I checked the FAQs section on the link, there they have answered 2 questions (see below) and with different interest rates

    3.13 What is the interest rate applicable on delayed payment of Service Tax?
    Every person, liable to pay the service tax in accordance with the provisions
    of section 68 of the Act or rules made there under, who fails to credit the tax
    or any part thereof to the account of the Central Government within the period
    prescribed, shall pay simple interest @18% per annum. Interest is payable for the period from the first day after the due date till the date of payment of
    any defaulted service Tax amount. [Refer to Section 75 of the Finance Act,

    3.15.What are the penal consequences if the Service Tax is not paid or paid
    If a person who is liable to pay Service Tax fails to pay service tax, he shall
    pay in addition to such tax and interest, a penalty which shall not be less than
    Rs.100/- for every day during which such failure continues or @1% of such tax
    per month, whichever is higher. However, the penalty amount payable shall
    not exceed the amount of Service Tax payable. (Refer to Section 76 of the
    Finance Act, 1994).

    I am not sure which rate should be applicable in my case. Because both questions sounds to be almost same.


  4. ashalanshu says:

    Dear Sachin, the builder can not charge 18% interest from you. In all probability he has paid his due service tax already & now recovering his dues from you with interest. As per original Service Tax rules, the govt. rate of penal interest is 1% per month. Please check on your own at the official site of Service Tax




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