Swachh Bharat Cess: Government of India has announced Swachh Bharat Cess (notification No.21/2015-Service Tax, dated 6th November 2015). As per Chapter VI [Section 119] of the Finance Act, 2015 contains provisions for levy and collection of Swachh Bharat Cess (SBC) at a rate of 0.5% on all taxable services. This Cess would come into effect 15th November 2015. The New Service Tax rate including the SBC(.05%) would be 14.5%. As such Swachh Bharat Cess translates into a tax of 50 paise on every one hundred rupees worth of taxable services. The revenue from this SBC will be exclusively used for Swachh Bharat vision.
Salient Features Of Swachh Bharat Cess – At a Glance
- Swachh Bharat Cess was introduced by Finance Act, 2015 with effect from 15 November 2015.Swachh Bharat Cess is levied above and over Service Tax.
- Swachh Bharat Cess is levied above and over Service Tax.
- SBC is Levied at the rate of 2%, but the net rate of the exemption is 0.5%.
- Swachh Bharat Cess is Levied at a rate of 0.5% only on the value of taxable service, not on Service Tax amount.
- This Cess to be charged on abated value where abatements are authorized.
- It was charged separately on the invoice or bill.
- Swachh Bharat Cess to be paid by way of challan under specified SBC code.
- Swachh Bharat Cess to be paid in cash only, not be paid by employing CENVAT credit.
- Every service provider should contribute for Swachh Bharat Cess irrespective of nature ( Small/ Large Service Provider).
- SBC not payable on services under negative list or exempt services.
- It is also payable on Service Tax liability under reverse charge Mechanism.
Swachh Barat Cess- Frequently Asked Questions
What is Swachh Bharat Cess (SBC)?
Swachh Bharat Cess is a Cess, which shall be levied and collected under the provisions of Chapter VI of the Finance Act, 2015, as service tax on all the taxable services @ 0.5% of the value of taxable service.
What is the date of implementation of Swachh Bharat Cess?
The Central Government of India has scheduled that the provisions of Swachh Bharat Cess (notification No.21/2015-Service Tax, dated 6th November 2015 refers) will come into effect on the 15th day of November 2015.
Whether Swachh Bharat Cess would be leviable on services in the negative list and exempted services?
No, Swachh Bharat Cess (SBC) Is not leviable on services those covered under the negative list of services or services which are fully exempt from service tax.
Why has Swachh Bharat Cess been imposed?
Swachh Bharat Cess has been imposed on all taxable services for financing and promoting Swachh Bharat initiatives.
How will the Swachh Bharat Cess be calculated?
Swachh Bharat Cess would be calculated same as the Service tax. Therefore, Swachh Bharat Cess would be levied on the same taxable value as service tax.
Where will the money collected under Swachh Bharat Cess go?
The Proceeds(revenue) from the Swachh Bharat Cess (SBC) will be credited to the combined Fund of India. The Central Government of India may after due appropriation made by Parliament, utilize such sums of money of the 3 Swachh Bharat Cess for financing and promoting Swachh Bharat initiatives or for any other purpose relating to it.
IS there any separate accounting code will be there for Swachh Bharat Cess(SBC)?
Yes, for payment of Swachh Bharat Cess(SBC), a separate accounting code would be issued shortly in consultation with the Principal Chief Controller of Accounts. Refer the following table for Swachh Bharat Cess Accounting Code.
|Swachh Bharat Cess (Minor Head)||Penalties||Other Receipts||Tax Collection||Deduct-Refunds|
Is Swachh Bharat Cess would be required to be mentioned separately in the invoice?
Swachh Bharat Cess would be levied, collected, charged and paid to Government of India independent of service tax. So, SBC needs to be charged separately on the bill(invoice), accounted for separately in the books of account and paid separately under separate accounting code which would be notified shortly. Swachh Bharat Cess may be charged separately after service tax as a different line item on the invoice. SBC can be accounted & treated same as the Education cesses.
Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on the amount of service tax like we were earlier doing for calculating Education Cess and SHE Cess?
Ans. No, SBC is not a cess on Service Tax. SBC shall be levied @ 0.5% on the value of taxable services.
What would be the effective rate of service tax & Swachh Bharat Cess post introduction of SBC?
The effective rate of service tax plus with SBC, post introduction of SBC, would be [Service tax @14% + Swachh Bharat Cess @0.5%].
Whether Swachh Bharat Cess levied in all Services or Selected Services?
The Central Government of India was authorized to impose Swachh Bharat Cess either on all services or some of the taxable services. The Vide Notification No 22/2015-ST 6th November 2015 Government has notified 4; that SBC shall apply to all taxable services except services which are either fully exempt from service tax under any notification issued under section 93(1) of the Finance Act, 1994. Otherwise not leviable to service tax under section 66B of the Finance Act, 1994.
How will the Swachh Bharat Cess be calculated for services under reverse charge mechanism?
As per the reverse charge( Mechanism) under section 68(2) of the Finance Act, 1994, the liability has been carried from service provider to the service recipient. As per section 119 (5) of the Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made at this moment apply to Swachh Bharath Cess also. So, the reverse charge under section 68(2) of the Finance Act, 1994, is made applicable to Swachh Bharat Cess. In this surroundings, to clarify the Government has issued notification No. 24/2015-Service Tax dated 12/11/2015 to provide that reverse charge under notification No.30/2012-Service Tax dated 20th June 2012 shall be applicable for the purpose of levy of Swachh Bharat Cess mutatis mutandis.
How will Swachh Bharat Cess be calculated for services where abatement is allowed?
The Taxable services, on which service tax is leviable on a certain percentage of the value of taxable service, will attract Swachh Bharat Cess on the same proportion of value as provided in the notification No. 26/2012-Service Tax, 20/062012. So, it is applied for Swachh Bharat Cess as same as service tax. For example, in the case of GTA, [Service Tax + SBC]% would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%).
Whether CENVAT Credit of the Swachh Bharat Cess is available?
No, SWachh Bharat Cess is not united into the Cenvat Credit Chain. So, the credit of Swachh Bharat Cess cannot be employed. Further, This Cess cannot be paid by utilizing credit of any other duty or tax.
What would be the point of taxation(POT) for Swachh Bharat Cess?
As per Point of Taxation rules, since SBC levy has come for the first time, all services (except Negative List or exempted services) are being subjected to Swachh Bharat Cess for the first time. Swachh Bharat Cess is a new levy, which was not in existence earlier. Hence, as per the Rule 5 of the Point of Taxation Rules, 2011 would be applicable in this case. Therefore, in cases where payment has been received, and invoice is raised before the service becomes taxable, i.e. before 15th November 2015, there is no liability of Swachh Bharat Cess. In cases 5 where payment had been received before the service became payable and invoice are raised within 14 days, i.e. up to 29/11/2015, even then the service tax liability does not arise. SBC will be receivable on services which are provided on or after 15/11/2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov 2015 but payment is received before that date and invoice in respect of such service is not issued by 29th Nov 2015.
How would the tax (Service Tax and Swachh Bharat Cess) be calculated for services covered under Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006.?
The tax (Service Tax & SBC) on services covered by Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006, would be computed by multiplying the value determined by these respective rules with [Service @14% +SBC@0.5%]. So, the effective rate of Service Tax plus SBC in case of original works and other than original works under the works contract service would be 5.8% [(14% + 0.5%)*40%] and 10.15% [(14% + 0.5%)*70%] respectively. Similar would be the tax treatment for restaurant and outdoor catering services.
How would the liability be determined in the case of reverse charge services where services had been received before 15.11.2015 but consideration paid post 15.11.2015?
In respect of reverse charge mechanism, Swachh Bharat Cess liability is determined by Rule 7 of Point of Taxation Rules, as per which, the point of taxation is the date on which consideration is paid to the service provider. Thus, SBC liability in such case will be 0.5% X Value of taxable service.
Does a person providing both exempted and taxable service and reversing credit @ 7% of the value of exempted service under Rule 6 of Cenvat Credit Rules, does he need to reverse the SBC also?
As SBC is not integrated into the Cenvat Credit chain and reversal under Rule 6 is payment of the amount equal to 7% of the value of exempted services, hence, reversal of SBC is not required under Rule 6 of Cenvat Credit Rules, 2004.