ALFS gets stay on writ petition against CBEC

Anindita Dey

Mumbai, Aug 21: THE Association of Leasing and Financial Services Companies (ALFS) has got a stay order on the writ petition filed against the Central Board of Excise and Customs (CBEC) challenging the levy of service tax on the interest income arising out of the leasing and hire purchase activities.

According to ALFS special executive officer Mahesh Thakkar, the stay order has been received on the payment of service tax on the interest income of these companies. Consequently, these companies will be exempt from paying service tax on interest income with immediate effect., Mr Thakkar said. Service tax will be levied only on the interest content of the income arising out of the lease/hire purchase transactions and not on the entire income.

Further, for cases where an agreement has been entered into before July 16 but the installments of the interest payments accrue after the due date, service tax will not be levied on those monthly installments also.

The argument on the basis of which the petition has been filed specifies that while loans have been spared of the service tax net, lease/hire purchase which is one of the vibrant forms of financing the economy, should also be taken out the service tax regime.