Krishi Kalyan Cess (KKC) is a new cess introduced by our present Union Finance Minister Arun Jaitley in the Budget 2016 – 2017. This KKC Tax is supposed to be levied at a rate of 0.5% on all Goods and Services from 1st June 2016. Already the Government charges the Service taxes at the rate of 14% and Swachh Bharat Cess at a rate of 0.5% and with the introduction of Krishi Kalyan Cess (KKC) the rate would effectively go up to 15%. The rate of Service Tax is gradually increasing as years pass on. Slowly the rate may move closer to the Goods and Service Tax (GST) rate, i.e., between 17% to 18% which is expected to be applicable soon. As everyone is having so many doubts about KKC tax here, we are providing some of the popular questions and their answers.
What is the Meaning of Krishi Kalyan Cess
Krishi Kalyan Cess is introduced for improving the Agricultural Facilities. KKC is levied in accordance with the provision of Chapter VI of the Finance Act, 2015. Here the Assessee can get the Krishi Kalyan Tax Meaning, faq on KKC and Krishi Kalyan Cess Applicability.
Areas where Krishi Kalyan Cess is Applicable
Krishi Kalyan Cess is applicable, where the service tax collected by Central Government on Goods and Services. KKC would be applicable on all your Payments for Services like
- Internet Bills.
- Restaurant Bill Payment.
- Property under Construction.
- Telephone bills.
- Air Travel Agent.
- Payment of Rents.
- Digital Advertisements.
Here the main point is to be noted is that the Service Provider simply cannot mention 15% tax in the invoice. He must be required to mention KKC Tax separately in the Invoice and should be accounted separately in the books of accounts and must be paid separately under separate accounting code.
Krishi Kalyan Cess Calculation
Krishi Kalyan Cess is calculated in the same way as Service tax is calculated. Therefore, Krishi Kalyan Cess would be levied on the same taxable value as service tax. KKC Tax is not to be calculated on Service Tax but on the taxable value of the service provided. The percentage of tax according to the category is given in the table.
|Swachh Bharat Cess||0.5%|
|Krishi Kalyan Cess||0.5%|
Let us take an example for the clear understanding the Krishi Kalyan Cess calculation.
For a service provided by the Service provider worth of Rs.100/-, the Service Tax is taxed at a rate of 14%, that is Rs. 14/- and Swachh Bharat Cess will be at the rate of 0.5% that is Rs. 0.05 and Krishi Kalyan cess is taxed at the rate of 0.5% that is Rs. 0.05. Then the total taxable amount is Rs. 115/-.
Provisions of KKC
This KKC is supposed to be levied at a rate of 0.5% on all Goods and Services from 1st June 2016. These are provisions of Krishi Kalyan Cess.
Applicability of CENVAT Credit on KKC
A provider of output service shall be allowed to take CENVAT Credit of the Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016. This Cenvat Credit shall not be utilized for payment of KKC on any other duty or tax or cess. So, here there is applicability of CENVAT Credit on KKC. For more details of Krishi Kalyan Cess Cenvat Credit read the notification given below.
Point of Taxation for Krishi Kalyan Cess
The Point when a service shall be deemed (considered) to have been provided is known as Point of Taxation. Here Rule 5 of POT rules 2011 is covered under Point of Taxation Krishi Kalyan Cess. This is all about the Rule 5 of Point of Taxation (POT) Rule.
Rule 5 (Payment of Tax in case of new Services):
In a case of new services which was previously not covered due to negative list or exemption notification and is taxed for the first time.
- No tax shall be payable to the extent the invoice issued and the payment received for such invoice before such service became taxable.
- No tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within 14 days of the date when the service is taxed for the first time.
Applicability of Krishi Kalyan Cess on RCM (Reverse Charge Mechanism)
KKC will be applicable on all taxable services, so here Reverse Charge Mechanism is also applicable. Therefore, Krishi Kalyan Cess is payable along with service tax on the services availed and hence, covered under reverse charge mechanism.
Applicability of Krishi Kalyan Cess on Works Contract Service
According to Rule 2A of Valuation Rules of Service Tax the tax along with Swachh Bharat Cess and KKC needs to be applied on the taxable value. The Service Tax Rate would be as given below:
- In case of original works: 6% (15% x 40%) and
- Other than original works: 10.50% (15% x 70%).
Examples of KKC:
|Time of Issuance of Bill||Amount of the Invoice||Time of Receipt of payment||Amount of Payment received||Situation of Taxability|
|03/05/2016||Rs. 500,000/-||04/05/2016||Rs. 500,000/-||In this situation money is not taxable as the issue of the bill, and the receipt of payment is made before 1st June 2016.|
|04/06/2016||Rs. 400,000/-||29/05/2016||Rs. 400,000/-||It is not taxable as the receipt of payment is before 1st June 2016 while the bill is issued within 14 days from the service of taxability.|
|20/06/2016||Rs. 2,50,000/-||24/05/2016||Rs. 2,50,000/-||The money is taxable as an issue of the invoice within 14 days from the date of service is not met.|
Points to be Remembered
- KKC is applicable with effect from 01/06/2016.
- KKC is collected or levied only on taxable services.
- As this KKC is collected on the value of services and the Service Tax rate would be 15% with effect from 01/06/2016.
- The effective increase of Service tax is 15% that is Service Tax is 14%, Swachh Bharat Cess is 0.5%, and KKC is 0.5% so totally 15%.
- The Cenvat Credit of Krishi Kalyan Cess is available and shall be utilized only for the payment of KKC Tax.
- There should need to maintain separate accounts books for KKC.
- Refund of this Krishi Kalyan Cess shall also be allowed as the Cenvat Credit. Further, refund of this KKC shall be allowed to Exporter of Goods as well as Exporter of Service as there is no restriction of its availment. A suitable amendment is awaited in Cenvat Credit Rules 2004 as well as refund notifications.
- This Cess shall be applicable only on the abated value in case of services covered under abatement scheme.
- Krishi Kalyan Cess shall also be applicable to the services covered under Reverse Charge Mechanism.
- Separate accounting codes for its payment shall be released soon.
- Rule 5 of Point of Taxation Rules (POT) 2011 need to be referred for its applicability in the case of ongoing contracts on 01/06/2016. Thus, if payment is made before 01/06/2016, then this cess is not applicable.
FAQ on KKC as per Union Budget
What is a Cess?
The Government, if they want to raise funds for a specific purpose collects the cess which is a kind of tax. This cess collected by the government is used for the development of the country and helps when the money is required for developing. For example, the tax collected on Education Cess is used for the developing Primary Education. This is how the Cess or tax works.
From Which Date, Krishi Kalyan Cess is going to applicable?
Krishi Kalyan Cess is going to applicable from 1st June 2016. As per the Notification No. 22/2015 KKC does not apply on Services mentioned in “Mega Exemption List” and “Negative List”.
What is the Rate of Krishi Kalyan Cess?
This Krishi Kalyan Cess is supposed to be levied or collected at a rate of 0.5% on all Goods and Services from 1st June 2016.
What would be the effective rate of tax in case of Services covered by Abatement?
As per notification No.26/2012 which is dated on 20th June 2012 KKC applies in the same manner as it applies for Service Tax. For example in case of Goods Transport Agency (GTA) Service the tax would be 15% x 30% = 4.50%.
How will this KKC tax money be utilized?
The money collected in the name of KKC is effectively used for the improvement of agriculture and also for the welfare of farmers. The income of KKC is first credited to the consolidated fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilize such income of the Krishi Kalyan Cess for such specified agricultural purposes.
What is the Accounting Code for Krishi Kalyan Cess?
The Krishi Kalyan Cess Accounting Code is alloted by the by the Office of the Controller General of Accounts. The Accounting Codes for the new Minor Head “507-Krishi Kalyan Cess” and new Sub-heads, for payment of KKC tax, is as given below:
|S.No||Minor Head of Krishi Kalyan Cess||Tax Collection||Other Receipts (Interest)||Deduct-Refunds||Penalties|