In the Union Budget 2016, Arun Jaitley has proposed a new cess which will come into effect on 1st June 2016, @ 0.5% on all services, which are presently accountable to service tax. It will translate into a service tax of 50 paise only on every one hundred rupees worth of taxable services. Krishi Kalyan Cess of 0.5% to be levied over on Service Tax and the Swachh Bharat Cess.
Some doubts are being raised on the levy of Krishi Kalyan Cess, such as
- What would be Krishi Kalyan Cess on services where service tax is being paid under the different rates of service tax?
- What would be the value of services for computation of Krishi Kalyan Cess?
- Whether Reverse charge mechanism would apply to the levy of Krishi Kalyan Cess?
- What would be the Krishi Kalyan Cess point of taxation?
What is Krishi Kalyan Cess?
The Government of India has proposed to levy Krishi Kalyan Cess w.e.f from 1st June 2016. The purpose charging this cess is to finance and promote initiatives to enhance agriculture or for any other purpose relating to agriculture.
Krishi Kalyan Cess
- The Clause 158 of Finance Bill seeks to insert new Chapter-VI to levy a cess to be known as the Krishi Kalyan Cess. As service tax on all taxable services for the Union for financing and promoting capability to improve agriculture or for any other purpose relating to Agriculture.
- The Krishi Kalyan Cess leviable under Sub-section (2) shall be in addition to any Cess or service tax impose on such taxable services under Chapter V of the Finance Act, 1994.
- The revenue of the Krishi Kalyan Cess charged under sub-section (2) shall be first credited to the Consolidated Fund of India and the Central Government. After due appropriation made by Parliament according to law, utilise the sums of money of the Krishi Kalyan Cess for enhancing agriculture [purposes specified in sub-section (2)].
- The allocation of Chapter V of the Finance Act, 1994 and the rules as mentioned. The rules which include exemptions from tax, refunds, interest and imposition of penalty. And apply for the levy and collection of the Krishi Kalyan Cess on taxable services. As they apply to the levy and collection of tax on taxable services under the said Chapter or the rules made thereunder, as the case may be.
Krishi Kalyan Cess Rate
The Krishi Kalyan Cess is to be Charged and collected as Service Tax on all taxable services at the rate of 0.5 % on the value of services.
This Cess won’t be levied on your Income but would be levied on all Services on which Service Tax levied. Therefore, from 1st June, the effective rate of service tax would be 15% i.e.
|2.||Swachh Bharat Cess||0.5%|
|3.||Krishi Kalyan Cess||0.5%|
This new Krishi Kalyan Cess would be applicable on all your Payments for Services like Internet Bill, Telephone Bill, Rent Payment, Air Travel Agent, Under Construction Property, Restaurant Bill Payment, Digital Advertisements, etc. It is to be noted that the Service Provider cannot simply mention 15% Tax on the Invoice and he would be required to mention the break up of the Invoice.
Availability of Krishi Kalyan Cess CENVAT Credit
It is expected that as soon as Krishi Kalyan Cess comes into force, the Krishi Kalyan Cess CENVAT credit rules would also be revised accordingly to allow CENVAT Credit of Krishi Kalyan Cess. So, CENVAT credit of Krishi Kalyan Cess would be available.