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|
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:
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)
No. 31/2016-Service Tax
New Delhi, the 26th May, 2016
G.S.R. 554(E).-In exercise of the powers conferred by sub-section (1) read with subsection (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:-
1. (1) These rules may be called the Service Tax (Third Amendment) Rules, 2016.
(2) These rules shall come into force from the 1st day of June, 2016.
2. In the Service Tax Rules, 1994, in rule 6,
(i) in sub-rule (7D), for the figures “0.5” the words “effective rate of Swachh Bharat Cess” and for the words, figures and brackets “14 (fourteen)”, the words and figures “rate of service tax specified in section 66B of the Finance Act, 1994” shall be substituted;”;
(ii) after sub-rule (7D), the following sub-rule shall be inserted, namely:-
(7E) The person liable for paying the service tax under sub-rule (7), (7A), (7B) or (7C) of rule 6, shall have the option to pay such amount as determined by multiplying total service tax liability calculated under sub-rule (7), (7A), (7B) or (7C) of rule 6 by effective rate of Krishi Kalyan Cess and dividing the product by rate of service tax specified in section 66B of the Finance Act, 1994, during any calendar month or quarter, as the case may be, towards the discharge of his liability for Krishi Kalyan Cess instead of paying Krishi Kalyan Cess at the rate specified in sub-section (2) of section 161 of the Finance Act, 2016 (28 of 2016) and the option under this sub-rule once exercised, shall apply uniformly in respect of such services and shall not be changed during a financial year under any circumstances.”
[F.No. B-1/18/2016 – TRU]
Note:-The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) by notification No. 2/94-Service Tax, dated the 28thJune, 1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No. 20/2016-Service Tax, dated the 8th March, 2016 vide number G.S.R. 283(E), dated the 8th March, 2016.