Jatin Grover

Jatin GroverThe Finance Act, 2015 has empowered the Central Government to impose Swachh Bharat Cess (SBC) upto 2% on value of taxable service. Recently Central Government vide Notification No.21/2015-Service Tax, dated 6th November, 2015 has imposed SBC at the rate of 0.5% on all the taxable services w.e.f 15th November, 2015.

CALCULATION OF SBC

It must be noted that unlike Education cess which was applicable earlier being calculated on Service tax amount, SBC is to be calculated on Value of Taxable services; effectively increasing the service tax rate to 14.5%.

IMPLICATIONS ON SERVICE PROVIDER

Implications on Invoice

SBC is to be charged separately on the Invoice as a different line item in invoice just like Education cess was charged earlier. CBEC through its press release has also clarified that SBC is to be accounted and treated similarly to Education cess.

Accounting Code

For payment of Swatch Bharat Cess, a separate accounting code would be notified shortly in consultation with the Principal Chief Controller of Accounts. These are as follows:-

Swatch Bharat Cess

(Minor Head)

Tax Collection Other Receipts Penalties Deduct Refunds
0044-00-506 00441493 00441494 00441496 00441495

 For those availing Abatement

Value of SBC will be calculated in the same manner as Service Tax is calculated in case of services for which Abatement is applicable.

For example, in the case of GTA, [Service Tax + SBC]% would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%)

Cenvat Credit

Cenvat Credit Rules have prescribed the duties and taxes for which credit is available. However there is no amendment till now in these rules. Hence till now no Cenvat credit on SBC paid is available.

Point Of taxation

Rule 5 of Point of Taxation Rules, 2012 is applicable in case of SBC since it has been made applicable for the first time. However in cases where Rule 5 is not applicable i.e cases in which Payment is on or after the date of levy will be governed by Rule 3. Hence the Point of Taxation in different cases will be as follows:

Date of Completion of Service Date of Payment Date of Invoice Point of Taxation
01/11/2015 14/11/2015 28/11/2015 14/11/2015(Rule 5)
10/10/2015 14/11/2015 28/11/2015 14/11/2015(Rule 5)
01/11/2015 15/11/2015 28/11/2015 15/11/2015(Rule 3)
01/11/2015 28/11/2015 14/11/2015 14/11/2015(Rule 3)
10/10/2015 28/11/2015 14/11/2015 10/10/2015(Rule 3)
10/10/2015 14/11/2015 01/11/2015 01/11/2015(Rule 3)

Further in cases where Rule 5 is applicable, Date of Payment shall be Date of credit in Bank if it is not within 4 working days after date of levy.

Services covered under Rule 2A, 2B or 2C of Service Tax (Determination of Value) Rules, 2006

Value of Taxable service in these cases will be calculated by multiplying the value determined in accordance with these respective rules with [14% + 0.5%]. Therefore, effective rate of Service Tax plus SBC in case of original works and other than original works under the works contract service would be 5.8% [(14% + 0.5%)*40%] and 10.15% [(14% + 0.5%)*70%] respectively. Similar, would be the tax treatment for restaurant and outdoor catering services.

Composition Scheme

Person liable for paying the service tax under sub- 6 rule (7), (7A), (7B) or (7C) of rule 6 of Service Tax Rules, shall have the 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%

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.

An example for this is as follows:

A lottery distributor of a lottery in which less than 80% is distributed as prize and total amount on selling lottery ticket collected is 15 Lakhs than in this case as per valuation rules, Service tax payable is Rs.22000; value of SBC in this case will be Rs.22000 x 0.5%/14% i.e Rs. 786.

IMPLICATIONS ON SERVICE RECEIVER

Government has issued notification No. 24/2015-Service Tax dated 12th November, 2015 to provide that reverse charge under notification No.30/2012-Service Tax dated 20th June, 2012 shall be applicable for the purpose of levy of Swatch Bharat Cess mutatis mutandis.

Point of Taxation for Service Receiver

Rule 7 of Point of Taxation Rules overrules Rule 3, 4 and 7 but it does not overrule Rule 5. However for applicability of Rule 5, Date of payment should be prior to date of levy. Hence for checking applicability in case of reverse charge Rule 7 will be referred. Various cases for consideration can be as follows:

Date of Invoice Date of Payment Point of Taxation
01/10/2015 14/11/2015 14/11/2015(Rule 7)
01/10/2015 14/12/2015 14/12/2015(Rule 7)
01/10/2015 14/01/2016 02/01/2015(Rule 7)

Other Implications

Other Implications shall be applicable on Service Receiver mutatis mutandis.

(Author is a CA Final Student from Delhi and can be reached at jat.grover44@gmail.com)

Author Bio

Qualification: CA in Job / Business
Company: Fortune 500 Company
Location: Mumbai, Maharashtra, IN
Member Since: 06 Oct 2017 | Total Posts: 10
Author is a CA Final Rank holder (AIR 34 – Nov’15) currently working in a Fortune 500 company and can be reached at his facebook page – Jatin’s Tax Arena ( https://www.facebook.com/TheTaxArena/?ref=aymt_homepage_panel ) or his Linkedin account – ( https://www.linkedin.com/in/ca-jatin-grove View Full Profile

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0 responses to “Practical Aspects of Swachh Bharat Cess on Service Provider & Service Receiver”

  1. loganathan says:

    swachh bharat cess cade number tell me sir

  2. ompal says:

    If service provided in November 1 to November 14 and billed on November 15, How much service tax applicable?

  3. ASHOK KUMAR says:

    Dear Sir,

    Please Guide me how to re-issue C Form in Haryana.

    Mistake in description of Goods.

  4. ASHOK KUMAR says:

    Dear Sir,

    Please tell me date of payment “Swachh Bharat Cess” in Haryana.

  5. ashok says:

    For an invoice raised on 1st dec for services rendered for the month of nov for the first 14 days 0f nov service tax@ 14% is payable or for full month 14.5% is payable on introduction of swach bharat cess from 15 th nov.

    • Jatin Grover says:

      Dear Ashok,

      Point of taxation in situation mentioned by you shall be 1st of Dec’2015. Hence ST shall be payable @14.5% on the whole amount of service.

  6. Sonal says:

    If we charged service tax with SBC on bill can we take credit of service tax paid on other’s against this SBC or we pay SBC directly to Govt?

    • Jatin Grover says:

      Dear Sonal,

      Credit of SBC is not available.

      Cenvat Credit Rules, 2004 have prescribed the duties and taxes for which credit is available. However there is no amendment till now in these rules. Hence till now no Cenvat credit on SBC paid is available.

  7. Raja says:

    Sir,
    Hats off in giving us a brief summary of SBCess implementation by Central Government.

    However, on trying to make the payment through aces site selecting the proper codes, on reaching the banking site this shows invalid minor head code.

    Has anyone tried making an Online Payment of Service Tax along with Separate SBCess.

  8. kalpesh says:

    sir,

    swacchh bharat cess should paid separately or along with service tax.what is payment tax code ?

  9. samran says:

    is service tax & SBC amt. Combined 14.5% or service tax and SBC shown in Invoice 14% + .5% Individual shown in Invoice

    • Jatin grover says:

      Similar to E.Cess, SBC is to be shown seprately in Invoice. Service Tax rate is 14% only, but effective rate has become 14.5% I.e 14% Service tax and 0.5% SBC

  10. Kiran says:

    Thanks for sharing fast, reliable and accurate information.
    Cenvat credit on SBC is not available that is major problem for the assessee. Burden on the assessee to do proper tax compliance.

    • Jatin grover says:

      Thanks for the appreciation.
      Yes that is a burden on assessee. Hope so an amendment will be made soon in this regard.

  11. Reshma says:

    Whether we can adjust credit of service tax or cess against payment of sbc

  12. samir rathore says:

    Dear Sir,
    “Date of payment” that you have mention is date of payment to the party or to the govt.?

  13. Anoop Gupta says:

    Good Contribution made by you for others.

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