The Associated Chambers of Commerce and Industry of India (Assocham) said on Sunday the increase in interest rate from 18 per cent to 30 per cent on delay in payment of service tax and the mandatory deposit of 7.5-10 per cent of demand before an appeal for customs and excise claims is filed, is unjustifiable.
According to the Budget proposal, with effect from October 1, service tax assessees should pay interest at the rate of 24 per cent a year if the delay in payment of tax is beyond six months but less than one year, and at 30 per cent a year for delays beyond one year. For delays below six months, the rate of interest will be 18 per cent a year, Assocham stated.
"Such a high rate of interest is unwarranted and it has no justification at all," said the industry body.
According to the Budget proposals, assessees under the customs, central excise and service tax have to make mandatory deposit of 7.5-10 per cent (with a cap of Rs 10 crore) of the demand and penalty before filing an appeal before the commissioner (appeals) or to the tribunal.
Such deposit will not attract any interest. Also, there is no provision of returning such deposit, Assocham said.