CA Gaurav Gupta

Central Government has vide Notification No.35/2016-Service Tax dated 23.06.2016, has exempted taxable services from levy of Krishi Kalyan Cess (“KKC”) in cases which satisfies the following two conditions:

– Where invoices have been raised prior to 01.06.2016; and

– Where provision of service has been completed prior to 01.6.2016.

Accordingly, the concern of the industry that KKC shall be levied on the opening debtors i.e. remaining unpaid as on 31.03.2016 has been duly answered and no KKC shall be levied on such amounts. Though the notification is effective from 23.6.2016, payments of opening debtors as received between 01.6.2016 and 22.6.2016 can still be a cause of litigation, however, we trust that the government would read the Notification to provide relief to their assesses for such period also.  It is also important to mention that the provision of service should be completed in total and no relief in terms of proportionate completion is mentioned in the notification.

Thus, the levy of KKC can be explained as under:

SituationServices providedInvoice IssuedPayment receivedWhether KKC applicable
Situation ABefore 01.06.2016Before 01.06.2016Before 01.06.2016No (rule 5)
Situation BBefore 01.06.2016Before 01.06.2016After 31.05.2016Exempted (35/2016)
Situation CBefore 01.06.2016After 31.05.2016After 31.05.2016Yes
Situation DBefore 01.06.2016On or before 14.06.2016Before 01.06.2016No (rule 5)
Situation EBefore 01.06.2016After 14.06.2016Before 01.06.2016Yes
Situation FAfter 31.05.2016On or before 14.06.2016Before 01.06.2016No (rule 5)
Situation GAfter 31.05.2016After 14.06.2016Before 01.06.2016Yes
Situation HAfter 31.05.2016Before 01.06.2016Before 01.06.2016No (rule 5)
Situation IAfter 31.05.2016Before 01.06.2016After 31.05.2016Yes
Situation JAfter 31.05.2016After 31.05.2016After 31.05.2016Yes

Note: Rule 5 refers to Rule 5 of Point of Taxation Rules, 2011.

The author can be reached at  gaurav@mgsadvisors.com

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