Business Daily from THE HINDU group of publications
Saturday, Jun 28, 2008
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Business Daily from THE HINDU group of publications Saturday, Jun 28, 2008 ePaper | Mobile/PDA Version | Audio |
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Taxation Money & Banking - Credit Market Web Extras - Policy ‘Banks’ foreclosure charges liable for service tax’ K.R. Srivats
New Delhi, June 27 Pre-closure or foreclosure charges collected by banks and other companies, as part of their lending and financial services activities, would attract service tax, the Finance Ministry has clarified. This would imply that customers paying foreclosure charges may have to foot the service tax bill, as banks are likely to pass on the service tax burden to them. Services of banking companies or financial institutions attract service tax under ‘banking and other financial services’, which includes lending. The Central Board of Excise and Customs (CBEC) has taken a stance that pre-closure/foreclosure charges are not in the nature of ‘interest’, sources said. It has also been made clear that foreclosure charges are also not charges collected for delayed payment. As foreclosure charges are not ‘interest’, they are being treated as consideration for service provided and hence liable to service tax, the board has clarified.
The field formations in the revenue department have brought to the notice of the CBEC that divergent practices were being followed on levy of service tax on services provided by banks and other financial institutions on the amount collected as pre-closure/foreclosure charges in relation to lending. More Stories on : Taxation | Credit Market | Policy
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