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%

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION

No. 28/2016-Service Tax

New Delhi, the 26th May, 2016

G.S.R. —(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) read with sub-section (5) of section 161 of the Finance Act, 2016 (28 of 2016), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts such taxable services from whole of Krishi Kalyan Cess leviable thereon which are either exempt from the whole of service tax by a notification or special order issued under sub-section (1) or as the case may be under sub-section (2) of section 93 of the Finance Act, 1994 or otherwise not leviable to service tax under section 66B of the Finance Act, 1994:

Provided that Krishi Kalyan Cess shall be leviable only on that percentage of taxable value which is specified in column (3) for the specified taxable services in column (2) of the Table in the notification No. 26/2012-Service Tax, dated 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide number G.S.R. 468 (E), dated the 20th June, 2012.

Explanation.- It is hereby clarified that value of taxable services for the purposes of the Krishi Kalyan Cess shall be the value as determined in accordance with the Service Tax (Determination of Value) Rules, 2006.

This notification shall come into force from the 1st day of June, 2016.

[F.No. B-1/18/2016 – TRU]

(Anurag Sehgal) Under Secretary

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Category : Service Tax (3401)
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