As provided for in the budget by Finance Minister Mr.
Arun Jaitley, government of India has levied Swachh Bharat Cess on value of services
provided. Thus effective rate of service tax has increased from 14% to 14.50%. In
this Article I have tried to summarize points of FAQ on Swachh Bharat Cess (SBC) issued
by CBEC-
1. Swachh Bharat Cess shall be levied and
collected as service tax on all the taxable services at the rate of 0.5% of the
value of taxable service.
2. The cess shall be levied from 15th day of
November, 2015.
3. SBC is not leviable on services which are fully exempt
from service tax or those covered under the negative list of services.
4. SBC has been imposed for the purposes of financing and
promoting Swachh Bharat initiatives or for any other purpose relating thereto.
5. Proceeds of the SBC will be credited to the
Consolidated Fund of India, and utilise such sums of money of the SBC for the
purposes of financing and promoting Swachh Bharat initiatives or for any other
purpose relating thereto.
6. SBC would be levied on the same taxable value as
service tax.
7. SBC needs to be charged separately on the invoice,
accounted for separately in the books of account and paid separately under
separate accounting code. SBC may be charged separately after service tax as a
different line item in invoice.
8. For payment of SBC, a separate accounting code would
be notified shortly in consultation with the Principal Chief Controller of
Accounts. These are as follows:-
|
Swachh
Bharat Cess
(Minor
Head)
|
Tax
Collection
|
Other
Receipts
|
Penalties
|
Deduct
Refunds
|
|
0044-00-506
|
00441493
|
00441494
|
00441496
|
00441495
|
9. Effective rate of service tax plus SBC, post
introduction of SBC, would be 14.50%.
10. SBC is not to be considered as cess on Service Tax.
SBC shall be levied @ 0.5% on the value of taxable services.
11. Scope:
Government has notified that SBC shall be
applicable on 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 or are otherwise not leviable to service tax under
section 66B of the Finance Act, 1994.
12. In case of reverse charge under section 68(2) of the
Finance Act, 1994, the liability has been shifted 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 thereunder
are applicable to SBC also. Thus, the reverse charge under section 68(2) of the
Finance Act, 1994, is made applicable to SBC.
13. ABATEMENT:
Taxable services, on which service tax is leviable on a
certain percentage of value of taxable service, will attract SBC on the abated
percentage of value as provided in the abatement notification.
14. CENVAT:
SBC is not integrated in the Cenvat Credit Chain as
enunciated in Rule 6. Therefore, credit of SBC cannot be availed.
Further, SBC cannot be paid by utilizing credit of any other duty or tax.
15. POINT OF TAXATION (POT):
POT shall be determined as per Rule 5 of the Point of Taxation Rules explained as follows-
NO SBC to be levied:
·
In cases where payment has been received and invoice is
raised before the service becomes taxable, i.e. prior to 15th
November, 2015, there is no lability of Swachh Bharat Cess.
·
In cases where payment has been received before the
service became taxable and invoice is raised within 14 days, even then the
service tax liability does not arise.
SBC will be levied:
·
SBC will be payable on services which are provided on or
after 15th Nov, 2015, invoice in respect of which is issued on or after that
date and payment is also received on or after that date.
· SBC will also be payable where service is provided on or
after 15th Nov, 2015 but payment is received prior to that date and invoice in
respect of such service is not issued within 14 days.
16. For services covered by Rule 2A, 2B or 2C of Service
Tax (Determination of Value) Rules, 2006, effective rate of Service Tax plus
SBC under the works contract service in case of
Original works would
be 5.8% [(14% + 0.5%)*40%]and
Other than original works would be 10.15%
[(14% + 0.5%)*70%].
Similar, would be the tax treatment for restaurant and
outdoor catering services. The cumulative service tax and SBC liability would
be [14% ST + 0.5% SBC] of 40% of the total amount, i.e., 5.8% of the total
amount charged.
17. For air travel agent, life insurance premium,
purchase and sale of foreign currency and services by lottery
distributors/selling agents shall have the option to pay SBC as determined as
per the following formula:-
Service Tax liability X 0.5%/14%
18. SBC liability in case of reverse charge services
where services have been received prior to 15.11.2015 but consideration paid
post 15.11.2015 is determined in accordance with Rule 7 of Point of Taxation
Rules, as per which, point of taxation is the date on which consideration is
paid to the service provider. Thus, SBC liability in such case will arise.
19. As SBC is not integrated in the Cenvat Credit chain
and reversal under Rule 6 is payment of 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.
For further queries you may reach me on
mahershi@akvassociate.com
CA Mahershi Vijay
CA, CS, B.Com
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