Swachh Bharat Cess to increase Service Tax by 0.5%

Service tax rate goes up from 14% to 14.5% w.e.f 15th November 2015 vide notification 22/2015 ST dated 6-11-2015. Swachh Bharat Cess to increase Service Tax by 0.5%.  

The government has decided to impose, a Swachh Bharat Cess (SB Cess) @ 0.5 per cent on all services, which are presently liable to service tax. The additional cess would be over and above the 14 per cent Service Tax rate which is already being levied.

Finance minister Arun Jaitley had in Budget 2015-16 proposed to levy a Swachh Bharat cess of up to 2 per cent “on all or certain services, if need arises”. This increase in service tax may yield the government an additional about Rs 400 crore during the remainder of the current fiscal.

It was clarified through notification that No SB Cess on services specified under the Negative List of services or otherwise exempted. Therefore, SB Cess @ 0.5% will be levied on value of all taxable services except the following:

• Negative List of Services under Section 66D of the Finance Act, 1994
• Services exempted by a notification issued under sub-section (1) of Section 93 of the Finance Act, 1994 i.e.
  • Mega Exempted Services vide Notification No. 25/2012-ST dated June 20, 2012.
  • Services exempted as specified to certain extent under the Abatement Notification No. 26/2012-ST dated June 20, 2012.

 

Impact on additional Swachh Bharat Cess @ 0.5%

• Effective rate of service tax post introduction of SBC would be 14.5%
• Swachh Bharat Cess would be applicable on all taxable services including reverse charge.
• Swachh Bharat Cess would be levied, charged, collected and paid to government independent of service tax. This needs to be charged and paid separately on the invoice and accounted separately in the books of account
• As there is no amendment in the Cenvat Credit Rules, 2004 regarding availment and utilisation of swachh Bharat Cess credit would not be admissible.
• Swachh Bharat Cess is levied under chapter VI of the Finance Act, 1994 and is applicable only on provision of service. There is no imposition of swachh Bharat cess on the goods manufactured.

 

On the verge, when Aam Aadmi is already so much pressed with the increasing cost and taxes, will this SB Cess over and above the present rate of service tax be equitable?

In the last budget, the government had increased the service tax rate from 12% to 14%, which is widely expected to increase once goods and services tax kicks in. A further increase of 0.5% service tax as Swachh Bharat cess will not only increase the effective service tax rate to 14.5% but also cause corporates to change their systems again to comply with this levy.

Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. This will translate into a tax of 50 paisa only on every Rs 100 worth of taxable services. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives.

Was Swachh Bharat Cess for maintenance of sanitation a requisite for enforcing the cess over and above 14% service tax? It even could 13.5% + 0.5% for Swachh Bharat.

To download the notification click.

____________________________________________________________________________________________________