19 Summarized points of FAQ on Swachh Bharat Cess

CA Gaurav Agrawal

In this Article I have Summarized 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 Central Government has appointed 15th day of November, 2015 as the date from which provisions of Swachh Bharat Cess will come into effect.

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 which would be notified shortly. SBC may be charged separately after service tax as a different line item in invoice. It can be accounted and treated similarly to Education cesses.

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:-

9. Effective rate of service tax plus SBC, post introduction of SBC, would be [14% + 0.5%].

10. SBC is not a cess on Service Tax. SBC shall be levied @ 0.5% on the value of taxable services.

11. Scope of SBC: The Central Government was empowered to impose SBC either on all or some of the taxable services. Vide notification No 22/2015-ST dated 6-11-2015, 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.

For example, in the case of GTA, [Service Tax + SBC]% would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%)

14. CENVAT: SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.

15. As regards Point of Taxation, since SBC, is a new levy, which was not in existence earlier. Hence, Rule 5 of the Point of Taxation Rules would be applicable in this case.

NO SBC:

• 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, i.e. upto 29th November, 2015, even then the service tax liability does not arise.

SBC Apply:

• 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 by 29th Nov, 2015.

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 [calculated as per sub-rule (7), (7A), (7B) or (7C)] 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 be:

(0.5% X Value of taxable service)

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.

(Author is a Service Tax Consultant and can be reached at ca.gauravagrawal@gmail.com, Mob: +91 9911224940)