prpri Effective rate of Service tax from 15th November, 2015 is 14.50% Effective rate of Service tax from 15th November, 2015 is 14.50%

Gaurav Arya

Gaurav AryaCentral Government has imposed a new levy in the name of Swachh Bharat Cess (SBC). (Notification No. 21/2015 – Service Tax dated 06th November,2015).

Rate of SBC is 0.50% and it will be levied on the value of taxable services. Now the new rate of service tax plus SBC would be 14.50%. Kindly charge 14.50% on the invoices raised on or after 15th November, 2015.

Kindly note the below points in connection of SBC: –

1. It is not leviable on exempted services and services stated in negative list. (Notification 22/2015 – Service Tax dated 06th November, 2015)

2. SBC would be levied on value of taxable services instead of service tax as it is not a cess on Service Tax.

3. It needs to be separately mentioned on the invoices, accounted separately in the books of account and paid separately under separate accounting code.

4. Proposed accounting code for payment of SBC is 0044-00-506. New code will be notified shortly.

5. Vide Notification 24/2015-ST dated 12th November,2015, SBC is applicable as it is on the services mentioned under Reverse Charge Mechanism under Notification No. 30/2012-ST dated 20th June 2015. It means service recipient is liable to pay SBC on the value of taxable services it receives and paid to vendor.

6. Abatements stated in Notification 26/2012-ST dated 20th June, 2012 applies as it is on SBC in the same manner as it applies for service tax. Example: In case of Rent-a-Cab Service, Service Tax+ SBC would be 40% X (14% +.50%) = 5.80% (5.60% +.20%). (Notification 23/2015 – Service Tax dated 06th November, 2015)

7. SBC has cascading effect. It is not cenvatable as it not integrated into Cenvat Credit Chain. Credit of SBC cannot be availed and SBC cannot be paid by utilizing credit of any other duty or tax.

8. As SBC is a new levy, Rule 5 of the Point of Taxation Rules would be applicable in this case.

Case Study Provision of Service Date Invoice Date Payment Date Applicability of SBC
I Before 15th November,2015 Before 15th November,2015 Before 15th November, 2015 No
II Before 15th November,2015 Invoice raised within 14 Days (i.e. upto 29th November, 2015) Before 15th November, 2015 No
III Before 15th November,2015 After 15th November, 2015 After 15th November, 2015 Yes


IV After 15th November,2015 Invoice raised after 14 Days (i.e. upto 29th November, 2015) Before 15th November, 2015 Yes


9. In case of services where valuation is done at special rate like Works Contract, Restaurant services, SBC would be computed by multiplying the value determined in accordance with the respective rules [Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006] with [14%+0.5%]. (Notification 25/2015 – Service Tax dated 06th November, 2015)

10. In case of special rates given by sub rule (7), (7A),(7B) or (7C) of Rule 6 of Service Tax Rules (i.e. Air Travel Agent, Life Insurance Premium, purchase and sale of foreign currency and services by lottery distributors / selling agents), there is 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%

(About the Author– Gaurav Arya is Chartered Accountant of May,2011 attempt. He is having 4 years of post qualification  experience. His core area of expertise is service tax. Presently he is working with reputed CA firm of  Delhi. He is actively engaged in analysis & interpretation of provisions under the Service Tax statute,  Customs Act, CENVAT Credit Rules, provisions pertaining to VAT, Excise for various multinationals in Information Technology, BPO/KPO, Publishers, Service, Logistics, etc.)

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