In order to support financing initiatives relating to improvement of agriculture and welfare of farmers, Central Government has imposed Krishi Kalyan Cess (KKC) @ 0.5% on all taxable services with effect from 1st June 2016.

Now, the Central Government vide Circular No. 194/04/2016-ST, Dated: May 26, 2016 has provided the following accounting codes for KKC:

KKC (Minor Head) Tax Collection Other Receipts (Interest) Deduct Refunds Penalties
0044-00-507 00441509 00441510 00441511 00441512

Further, the following have also been provided for w.e.f 1st June 2016:

a) For tax payable on services covered under reverse charge or partial reverse charge, KKC would also be required to be paid along with Service Tax. Provisions of the Reverse Charge Notification will be applicable mutatis mutandis for the purposes of KKC also.

b) KKC will not be leviable on services which are exempt from Service tax. Therefore, KKC @ 0.5% will be levied on value of all taxable services except the following:

i. Activity excluded from the definition of Service under Section 65B(44) of the Finance Act;

ii. Negative List of Services under Section 66D of the Finance Act;

iii. Services exempted by a notification issued under Section 93(1) of the Finance Act i.e.

♦ Services exempted under Mega Exemption Notification vide Notification No. 25/2012-ST dated June 20, 2012.

♦ Services exempted, as specified to specified percentage under the Abatement Notification No. 26/2012-ST dated June 20, 2012 i.e. KKC would be computed on abated value of taxable services.

iv. Services exempted by Special Order issued under Section 93(2) of the Finance Act.

c) Value of taxable services for the purposes of the Krishi Kalyan Cess will be the value as determined in accordance with the Service Tax (Determination of Value) Rules, 2006. Thus, KKC would be levied in the following manner:

In terms of Service Tax Valuation Rules, Service tax along with SB Cess and KKC needs to be applied on taxable value. Accordingly, effective rate of Service tax in following illustrative cases would be:

Particulars Service Tax Rate
Works Contract: Original works 6% (15% x 40%)
Works Contract: Other than Original Work 10.50% (15% x 70%)
Restaurant and Outdoor catering: AC Restaurant services 6% (15% x 40%)
Restaurant and Outdoor catering: Outdoor catering services 9% (15% x 60%)

d) A Service provider is eligible to claim rebate of KKC paid on all the input services used in providing services exported in terms of Rule 6A of the Service Tax Rules, 1994, as KKC is included in definition of “service tax & cess” in the amended Notification No. 39/2012-ST dated June 20, 2012 (Rebate of the duty paid on excisable inputs or Service tax and cess paid on all input services used in providing service exported)

e) The SEZ Unit or the Developer of SEZ unit are eligible for refund of:

  • KKC paid on the specified services on which ab-initio exemption is admissible but not claimed.
  • That portion of KKC paid on the specified services which pertain to the authorised operation in a SEZ. When the services provided are common to the authorised operation in a SEZ and the operation in domestic tariff area, the same would be bifurcated in the manner as prescribed in rule 7 of the Cenvat Credit Rules. The same would be calculated as under:

Total service tax pertaining to authorised operation in a SEZ * 0.5 (KKC)/ 0.5(SBC)

14 (being the rate of service tax)

f) For services relating to air travel agents, insurance premium, purchase & sale of foreign currency and lottery distributor where the service tax is paid at an alternative rate in terms of sub-rules 7,7A,7B and 7C to Rule 6 of the Service Tax Rules, 1994, KKC would also be computed in proportion to such alternative rate e.

Total Service tax liability calculated under Rule 6(7)(7A), (7B) or (7C) * 0.5 (KKC)/ 0.5(SBC)

14 (being the rate of service tax)

For example: for domestic bookings the rate of KKC would be: 0.7% * 0.5% 14% = 0.025%

Circular No. 194/04/2016-ST

F. No. 354/31/2016-TRU

Government of India

Ministry of Finance

Department of Revenue

(Tax Research Unit)

Dated the 26th May, 2016.

To

Principal Chief Commissioners of Customs and Central Excise(All)

Principal Chief Commissioners of Central Excise & Service Tax (All)

Principal Director Generals of Goods and Service Tax/System/CEI

Director General of Audit/Tax Payer Services,

Principal Commissioners/ Commissioners of Customs and Central Excise (All)

Principal Commissioners/Commissioners of Central Excise and Service Tax (All)

Principal Commissioners/Commissioners of Service Tax (All)

Principal Commissioners/Commissioners LTU/Central excise/Service Tax (Audit)

Madam/Sir,

Subject: Accounting code for payment of Krishi Kalyan Cess – regarding.

Chapter VI of the Finance Act, 2015 will come into effect from 1st June, 2016. Krishi Kalyan Cess is leviable on all taxable services, other than services which are fully exempt from Service Tax or services which are otherwise not liable to Service Tax under section 66B of the Finance Act, 1994, at the rate of 0.5%.

2. Accordingly, accounting codes have also been allotted by the Office of the Controller General of Accounts for the new Minor Head “507-Krishi Kalyan Cess” and new Sub-heads as under:

S.No Krishi Kalyan Cess (Minor Head) Tax Collection Other Reciepts (Interest) Deduct Refunds Penalties
1 0044-00-507 00441509 00441510 00441511 00441512

4. All concerned are requested to acknowledge the receipt of this circular.

5. Trade Notice/ Public Notice to be issued. Wide publicity through local news media including vernacular press may be given. Hindi version shall follow.

Yours faithfully,

(Abhishek Chandra Gupta)

Technical Officer (TRU)

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