Bavesh Kumar Jain. D

Bavesh Kumar Jain. DNew levy ‘KKC’ applicable from 01.06.2016 @ 0.5% on value of all taxable service.

1. POT for determination of KKC liability for Service Provider (SP):

Rule 5 is applicable for determination of KKC liability for Service Provider (SP) due to the amendment in Budget 2016-17 and Notification No. 35/2016 also clarifies the applicability of KKC.

Amendment under Rule 5:-

POT would be determined by using Rule 5 in case of new levy or tax.

Since KKC is a new levy on taxable services, Rule 5 is applicable for determining POT. But Rule 5 does not consider the point of time of “completion of services”.

So to clarify this aspect Notification No. 35/2016 was released on 23rd June 2016 which is explained below:

Notification No. 35/2016 dated 23.06.2016:-

It exempts taxable services, with respect to which the invoice for the service has been issued before 01st June, 2016, from the whole of Krishi Kalyan Cess leviable thereon, subject to condition that the provision of service has been completed before the 01st June, 2016.

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So based on the Rule 5 and above notification, applicability of KKC in various scenarios is tabulated below:

Case Date of Completion of Service Date of Invoice Date of Receipt of Payment / Consideration KKC Payable or Not Rate of KKC Applicable
1 Before Before Before No NA
2 Before Before After No NA
3 Before Within 14 days of applicability of tax Before No NA
4 Before After 14 days of applicability of tax Before Yes 0.50%
5 Before After After Yes 0.50%
6 After Before Before No NA
7 After Before After Yes 0.50%
8 After Within 14 days of applicability of tax Before No NA
9 After After 14 days of applicability of tax Before Yes 0.50%
10 After After After Yes 0.50%

2. POT for determination of KKC liability for Service Receiver (SR) under Reverse Charge Mechanism (RCM):

Rule 7 is applicable for determination of KKC liability for Service Receiver (SR)

It starts with non-abstante clause: Notwithstanding anything contained in Rule 3, 4 or 8

POT except associated enterprises located outside India:-

> Payment made within 3 months from the date of invoice Date of payment
> Payment not made within 3 months from the date of invoice Date immediately following the end of 3 months

POT for associated enterprises located outside India :-

Earlier of the following:

  • Date of debit in the books of account of SR
  • Date of payment

Amendment under POT Rule 7:

Notification No. 21/2016-ST dated 30.03.2016

Proviso inserted in Rule 7

Where there is change in the liability or extent of liability of ST to be paid under RCM, Service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the POT shall be —> the date of issuance of invoice.

So based on the Rule 7 and above notification, applicability of KKC in various scenarios is tabulated below:

Case Date of Completion of Service Date of Invoice Date of Receipt of Payment / Consideration KKC Payable or Not Rate of KKC Applicable
1 Before Before Before No NA
2 Before Before After No NA
3 Before After Before No NA
4 Before After After Yes 0.50%
5 After Before After Yes 0.50%
6 After Before Before No NA
7 After After Before No NA
8 After After After Yes 0.50%

Conclusion:

  • Notification No. 35/2016 – ST provides relief to Service Providers from paying KKC on services completed before the applicability of KKC, since Rule 5 does not address that issue.
  • Amendment in Rule 7 vide notification no. 21/2016 – ST provides relief of Service Receivers paying service tax under Reverse Charge Mechanism, since erstwhile Rule 7 imposed hardship of Service Receivers.

Disclaimer:-

The analysis aims to provide the reader a general understanding of the proposed amendments and should not be construed as a legal opinion.

Author could be reached at bhaveshjain2673@gmail.com.

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