Krishi Kalyan Cess @ 0.5% on all taxable services from 1st June
Arun Jaitley while announcing the Budget 2016 has introduced a new cess
which would be levied @ 0.5% on the value of all taxable services. This
would be levied @ 0.5% and would be levied over and the above the
Service Tax and the Swachh Bharat Cess.
The Krishi Kalyan Cess
has been levied for the purpose of financing and promoting initiatives
to improve agriculture and would be applicable from 1st June 2016.
What is Krishi Kalyan Cess
A Cess is a Tax that is collected by the government to be used for a
specific purpose. The collections from levy of cess can be used only for
the purpose for which it has been collected and not for any other
purpose.
Just like Swachh Bharat Cess has been levied for
cleanliness, similarly Krishi Kalyan Cess has been introduced for
improving agricultural facilities.
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.
Particulars Amount
Service Tax 14%
Swachh Bharat Cess 0.5%
Krishi Kalyan Cess 0.5%
Total 15%
This new Krishi Kalyan Cess would be applicable on all your Payments
for Services like like Telephone Bill, Internet Bill, Rent Payment,
Restaurant Bill Payment, Under Construction Property, Air Travel Agent,
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.
Krishi Kalyan Cess for Services provided before 1st June
Krishi Kalyan Cess is applicable from 1st June 2016. In cases where the
services have been provided after 1st June and the payment received
after 1st June – Krishi Kalyan Tax would be applicable in all such
cases.
However, in some cases – it may be applicable for services
provided before 1st June as well. The following chart explains the
cases on which the Krishi Kalyan Cess would be applicable and the cases
in which the Krishi Kalyan Cess wont be applicable
Krishi Kalyan Cess 1
Case 1: Service is provided before 1st June, Invoice is raised and
payment received before 1st June –
Krishi Kalyan Cess would not be
applicable and total tax applicable would be 14.50%.
Case 2:
Service is provided before 1st June, Invoice is raised after 1st June
but the payment received before 1st June – Krishi Kalyan Cess would not
be applicable and total tax applicable would be 14.50%
It is to
be noted here that if the Invoice is not raised within 14 days of
receipt of payment, Krishi Kalyan Cess would be applicable and the total
tax applicable in such a case would be 15%.
Case 3: Service is
provided before 1st June, Invoice is raised before 1st June but the
payment received after 1st June – Krishi Kalyan Cess would not be
applicable and total tax applicable would be 15%.
Therefore, in
all such cases wherein the Bill like your Internet, Mobile, Rent etc has
been issued before 1st June – it is advisable to make the payment
before 1st June itself to avoid the new 0.5% Krishi Kalyan Cess. If the
payment is made before 1st June 2016 – this new 0.5% Krishi Kalyan Cess
would not be applicable.
But if the payment is made after 1st
June, this new cess would get applicable and total Tax to be paid will
get increased to from 14.5% to 15%.
Case 4: Service is provided
before 1st June, Invoice is raised before 1st June but the payment
received after 1st June – Krishi Kalyan Cess would not be applicable
and total tax applicable would be 15%.
Imp Note: In case of part
payment received or part invoice issued – each of the above case would
be individually applicable. Therefore for part payment received before
1st June – Krishi Kalyan Cess would not be applicable and for payment
received after 1st June – Krishi Kalyan Cess would be applicable.
Other Relevant Points regarding Krishi Kalyan Cess
Krishi Kalyan Cess should be levied and collected @ 0.5% in
accordance with the provisions of Chapter VI. This cess would be levied @
0.5% on the total value of services for the purpose of financing and
promoting initiatives to improve agriculture.
The proceeds of
the Krishi Kalyan Cess shall first be credited to the Consolidated Fund
of India and the Central Govt after due appropriation made by Parliament
in law in this behalf, utilise such sums of money of the Krishi Kalyan
Cess for the purpose specified above.
The provisions of Chapter V
of the Finance Act 1994 and the rules made thereunder including those
relating to refunds and exemptions from tax, interest and penalty shall,
as far as may be, apply in relation to the levy and collection of the
Krishi Kalyan Cess on taxable services, as they apply in relation to the
levy and collection of tax on such taxable services.
Input
Credit of Krishi Kalyan Cess would be allowed to be claimed against
Krishi Kalyan Cess. However, it is to be noted that input credit of
Swachh Bharat Cess is not allowed to be claimed.
