"7th 1.7 Recently vide Notification No. 23/2016-ST dated 13 April, 2016; CentralGovernment has inserted proviso in rule 6(2)(iv) to provide specific provision inrelation to services provided by Government or local authority to a business entity.Newly inserted provision reads as under:"Provided that this clause shall not apply to any service provided by Government or alocal authority to a business entity where payment for such service is allowed to bedeferred on payment of interest or any other consideration."th Central Government has issued Circular No. 192/02/2016-ST dated 13 April, 2016vide F. No. 334/8/2016-TRU to provide clarification on issues regarding levy ofservice tax on the services provided by Government or local authority to businessentity. Point No. 13 of the circular reads as under:S. No. Issue Clarification13 Whether Service Tax is payable on Rule 6(2)(iv) of the Service Tax (Determinationthe interest charged by Government of Value) Rules, 2006 has been amended videor a local authority where the Notification No. 23/2016 – ST dated 13.4.2016payment for assignment of natural so as to provide that interest chargeable onresources is allowed to be made deferred payment in case of any serviceunder deferred payment option. provided by Government or a local authority toa business entity, where payment for suchservice is allowed to be deferred on payment ofinterest, shall be included in the value of thetaxable service. 8Thus amount of interest payable to Government in lieu of deferment of payment ofservice shall not be excluded from taxable value meaning thereby interest portionpaid to Government for deferment of payment will form part of value of service.Thus it is to be noted that interest charges which are paid for delayed payment ofstatutory fee would also be considered as statutory fee and would be out of the servicetax ambit.1.8 In the present case, as per the licenses issued by the DTCP to the LLP it was very clearlymentioned that the EDC and IDC charges need to be deposited with the governmenteither on lump-sum basis i.e. all payment made within 30 days of the grant of license orin ten (six monthly) installments along with the interest @12% p.a. 1.9 Since the LLP collect such charges from the prospective customer on installment basisthat is also in future as and when demanded as per the plan opted by the customer,therefore LLP choses the latter option of payment of such charges to the government ininstallment along with the interest thus making this interest portion part of the cost ofEDC.1.10 Further, Article 3, clause (k) sub clause (vi) from the Builder Buyer Agreement whichtalks about the recovery of EDC/IDC charges on actual basis is reproduced below foryour reference:“The allottee(s) agree that any payment towards EDC/IDC levied/leviable by thestatutory authorities shall be paid and borne by the allottee(s) and any further increasein EDC/IDC by whatever name called or in whatever form and with all such conditions 9imposed by the statutory authorities including any interest/penalties thereon, shall bepaid and borne by the allottee. It is also agreed by the allottee(s) that all suchlevies/increase may be levied by the government of the Haryana or any othergovernmental authority (ies) on prospective or retrospective basis effective from the dateof license of the said project/complex. The developer hereby makes it explicit that if it isrequired to pay such levies, EDC/IDC and/or interest/penalties/other charges etc. in suchprospective/retrospective manner from the date of license(s) then the Developer shalldemand, and the allotte(s) undertakes to pay the same”.1.12 From the above clause it can be said the LLP has no intention to collect any margin overand above of what is payable to the government. Working of the actual EDC/IDC chargesrecovered from the customer on per sq. ft. basis is enclosed for your reference. From the above discussion, it becomes ample clear that LLP has recovered only actualamount payable to authorities and accordingly service tax should not apply on amountso recovered from prospective buyers. 1.13 The reliance can also be placed on the following judgments for proving the fact thatinterest would form part of consideration:Case 1: Supreme Court in case of Assistant Collector of Central Excise & Others etc. vsMadras Rubber Factory Ltd has affirmed that ‘The interest cost and expenses on sundrydebtors or interest on receivables is an expense subsequent to the date of sale and removalor delivery of goods and, therefore, the company would not be eligible to claim deduction onthis account. [859H of the Excise Act] "