Dr. Sanjiv Agarwal

Reverse Charge and KKC

Vide Notification No. 27/2016-ST dated 26.05.2016, it has been notified that w.e.f. 1.6.2016, wherever reverse charge mechanism is applicable in terms of Notification No. 30/2012-ST dated 20.06.2012, the same (reverse charge) shall be applicable mutatis mutandis for the purpose of Krishi Kalyan Cess.

Abatements and KKC

Vide Notification No. 28/2016-ST dated 26.05.2016, it has been notified in respect of KKC w.e.f. 1.6.2016 that –

  • Where a taxable service is exempt under any notification / special order or Service Tax is otherwise not payable, such service shall be exempt from levy of whole of KKC
  • KKC shall be leviable only on that portion / percentage of taxable service which is subject to Service Tax after availing abatement under Notification No. 26/2012-ST dated 20.06.2012.
  • Value of taxable services for the purpose of KKC shall be determined as per Service Tax (Determination of value) Rules, 2016.

Rebate of KKC for Exports

Vide Notification No. 29/2016-ST dated 26.05.2016, it has been notified that w.e.f. 1.6.2016, rebate of duty or Service Tax used in providing taxable services which are exported, under Notification No. 39/2012-ST dated 20.06.2012 shall also be available to Krishi Kalyan Cess (KKC).

Refund of KKC to Special Economic Zones

Vide Notification No. 30/2016-ST dated 26.05.2016, it has been notified that w.e.f. 1.6.2016, developer of Special Economic Zones (SEZ) or a unit in SEZ under Notification No. 12/2013-ST dated 1.7.2013 shall be entitled to refund of Service Tax paid on specified services on which ab initio exemption is admissible but not claimed and amount distributed to it as per clause III (a) of Notification. Further, refund of KKC shall also be allowed like that of SBC by multiplying total Service Tax distributed to it by sum of effective rates of SBC and KKC and dividing the product by rate of Service Tax as per section 66B of the Finance Act, 1994.

KKC and Composite Rate of Service Tax

Vide Notification No. 31/2016-ST dated 26.05.2016, Rule 6 of Service Tax Rules, 1994 relating to payment of Service Tax has been amended w.e.f. 1.6.2016 to provide reference to rate of Service Tax as per section 66B in sub-rule 7D of Rule 6 and to provide for option to pay Service Tax determined by multiplying total Service Tax liability calculated in terms of sub-rules (7, 7A, 7B or 7C) of Rule 6 by effective rate of KKC and dividing the product by rate of Service Tax specified in section 66B towards discharge of liability for KKC instead of paying KKC @ @ the specified rate (i.e. 0.50%). This option once exercised, will not be allowed to be changed in that financial year under any circumstances.

Cenvat Credit of KKC

Vide Notification No. 28/2016-CE (NT) dated 26.05.2016, w.e.f. 1.6.2016, Cenvat credit on KKC shall be allowed to service provider. However, Cenvat credit of any duty shall not be utilized for payment of KCC but Cenvat credit in respect of KKC shall be utilized only towards payment of KKC.

Accounting Codes for KKC

Vide Circular No. 194/04/2016-ST dated 26.05.2016, Ministry of Finance has issued the Accounting Codes for payment of Krishi Kalyan Cess as follows :

Minor Head               –         0044-00-507

Tax Collection          –          00-44-1509

Deduct Refunds      –           00-44-1511

Penalties                   –          00-44-1512

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