Dr. Sanjiv Agarwal

The charge of Service Tax under the Finance Act, 1994 as amended so far is at the rate of 12 percent on the value of taxable services. This rate of Service Tax is specified in section 66B of the Finance Act.

Presently the rate of 12 percent Service Tax is further subject to levy of education cesses as follows:

Education Cess (EC) – 2%

Secondary & Higher Education Cess (SHEC) – 1%

These education cesses of 2% and 1% are in addition to Service Tax of 12% and are charged on Service Tax i.e, 2% and 1% on amount of Service Tax and not on the value of services on which service tax is levied. Thus, effective levy of Service Tax for the service provider or service receiver becomes 12.36 percent (12% Service Tax, 2% on Service Tax as education cess and 1% on Service Tax as SHE cess).

These cesses are special purpose cesses which are appropriated by the Union for the purpose of promoting education and secondary & higher education and related purposes.

Budget 2015-16

The Union Budget speech in para 121 states as follows –

“Introduction of GST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14%”.

Not only this, in case of excise duty also, it has been said in para 118 as follows –

“As part of the movement towards GST, I propose to subsume the Education Cess and the Secondary and Higher Education Cess in Central Excise duty. In effect, the general rate of Central Excise Duty of 12.36% including the cesses is being rounded off to 12.5%”.

It is therefore, proposed that both the education cesses i.e., EC and SHE cess will get subsumed into the duty or tax and that the new rate shall be deemed to have factored education cesses in terms of rate or amount but education cesses will no longer be levied separately. The Government will get the amount, in fact even higher amounts as tax or duty itself and not in the form of cesses. Thus, cesses will no longer be levied but assessees will end up paying a higher rate and amount of duty or tax. This is evident from following table.

Tax / duty Present Position As per Finance Bill, 2015 Net increase
Tax EC & SHE Cess Total Tax EC & SHE Cess Total
Service Tax 12% 0.36% 12.36% 14% 14% 1.64%
Excise Duty (General Rate) 12% 0.36% 12.36% 12.50% 12.50% 0.14%

Specific rates of central excise duty in other items and commodities have also been revised. However, in case of petrol and diesel, such specific rates are revised only to the extent of subsuming the quantum of education cess presently levied on them, keeping the total incidence of excise duties unchanged.

Finance Bill, 2015

Clause 106 of the Finance Bill, 2015 seeks to amend section 66B so as to increase the Service Tax from 12 to 14 percent. Further, Clauses 179 and 187 respectively of the Finance Bill, 2015 provide that –

  • Section 95 of the Finance Act, 2004 levying education cess, and
  • Section 140 of the Finance Act, 2007 levying SHE cess

shall cease to have effect from a notified date after enactment of Finance Act, 2015.

Effective date

New Rate of Service Tax and cessation of both education cesses shall be applicable only after enactment of Finance Act, 2015 (i.e. on President’s assent) and upon notification of an effective date. Till the time the revised rate comes into effect, the ‘education cess’ and ‘secondary and higher education cess’ will continue to be levied in Service Tax.

Education cess on other taxes

Levy of both education cesses will continue to be levied on income tax and customs as these have not been subsumed in tax rates.

New Cess

It is also proposed to levy a new cess in the name of Swachh Bharat Cess (SBC) at a rate of 2% on all or any taxable services. The resources generated from this cess will be utilized for financing and promoting initiatives towards clean India (Swachh Bharat). For this purpose, provisions are contained in Chapter VI (Clause 117) of the Finance Bill, 2015. It shall be levied as Service Tax for the purpose of the Union for financing and promoting “Swachh Bharat” initiatives and any other purpose relating thereto.

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One response to “New Rate of Service Tax and Cess on Services”

  1. Amit Kumar Mukim says:

    ‘Construction, repair, maintenance, renovation of a road for use by general public’ is exempt from Service tax as per clause 13(a) of Mega Exemption Notification No 25/2012-ST dated 20-06-2012.

  2. Joseph John says:

    Dear Sir,
    under which code the service tax on Money changing activities to be paid.

  3. RUPA says:

    i don’t understand that service tax is @14.5% no any edu. Cess , Sec.& Higher Edu. Cess encluded. but showing a new cess (Swachh Bharat Cess). What is this? plz reply me

  4. RUPA says:

    CURRENT SERVICE TAX IN NO ADDED EDUCATION CESS AND SEC.& HIGHER EDU. CESS ?
    WHAT IS THE NEW SWACHH BHARAT CESS?

  5. Karan Parekh says:

    Isn’t SB cess 0.5% and not 2%?

  6. shahwez khan says:

    Dear Sir

    I want to know.
    please about break up of 14% i.e. old tax was like 12% and 2% edu 1% hec –

  7. Name says:

    How to set off cenvat of cess of 3% in june aginst 14% service tax

  8. Santosh kumar says:

    please give me latest service tax 14% breakup, how many charges service tax,education tax & HEC please explain.

  9. lakshmi says:

    how to calculate service tax and education cess and secondary education cess from service tax in new tax rate 14%

  10. Akshay Deo says:

    I want to pay service tax for first quarter of 2015-16. Should i pay through two separate challans i.e. April and may @ 12.36 (12 + 2 + 1 because we have to mention accounting codes of each cess too) and for june @ 14%
    please explain me.

  11. g.kavitha says:

    Please explain us the new rate of service tax & cess for Goods Transport Agency with Abatement amount and account code

  12. amaresh naik says:

    There is no requirement of Breakup for ST 14% w.e.f 01.06.2015

    you can make the payment under code 441089.

  13. Tamilarasi says:

    how to calculate service tax and education cess and secondary education cess from service tax in new tax rate 14%

  14. galib says:

    Sir,

    please about break up of 14% i.e. old tax was like 12% and 2% edu 1% hec

  15. Jai says:

    Hi,
    I have purchased a property and now been offered with possession by April 2015. Also, I have paid all the installments. I have not taken possession so far and planning it shortly.
    Previously during every payment, I have been charged service tax of 3.09% on basic sale price, 12.36% on PLC.
    Now, as per the new service tax rules amended from June 2015, do I need to make any further payments?.
    Kindly clarify.

    Thanks
    Jai

  16. Shahnwaz says:

    Hi,

    Please clear my doubt any one with suitable example, how to calculate education and secondary higher education cess after revised ST @14%.As per FY-2015, Cesses are subsumed in ST but cesses are levied in ST 14%.

    Regards
    shahnwaz Ansari

  17. Arvind jha says:

    Dear Sir,

    as per Old Rate of service tax 3,2,1 what is new rate

    please explain

  18. kummar says:

    hi service tax new rate applicable from 01.06.2015 onwards

  19. Nameless says:

    describe proposed provisions of GST regarding service tax!!

  20. Nameless says:

    Please mention proposed GST provisions regarding service tax

  21. Mohammed Rahil says:

    Dear Ashok
    Can i have the breakup for new service tax which is 14%.And how about the effective date

  22. Rawal Singh Bhati says:

    Dear Ashok Modi
    You may read the notificatio 25/2012 and 26/2012 that is first search in negative list then in mega exemption list

    Service taxs liable equaly on all irrespective of govt. Aur non govt. Subject to reverse charge mechanism and exemption

  23. Ashok Modi says:

    I wanted to know that if a firm engaged in Government road contract, what’s the rate of Service Tax. They can charge in old bill also or not.

  24. Rohit jain says:

    Is service tax new rate will be 11applicable from 01 April 2015.

  25. Ashok K. Modi says:

    if a firm in Government Road Contractor, what is the service tax rate. The Firm can charge from Government in bill or not?. They can charge in their old bill or not?
    Pl. send me clarification about the same.

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