Krishi Kalyan Cess (herein after referred to as KKC) is a cess on taxable services, at the rate of 0.5% of the value of such taxable services. The cess is in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994 or under any other law for the time being in force.
The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Krishi Kalyan Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under the said Chapter or the rules made thereunder, as the case may be.
The Cess is being levied with effect from 1st June, 2016 for the purposes of financing and promoting initiatives to improve agriculture or for any other purpose relating thereto.
Source:- Section 161 of the Finance Act, 2016 (No. 28 of 2016)
2. POINT OF TAXATION OF KKC
In order to bring clarity about the point of taxation of KKC, an explanation has been inserted in Rule 5 of the Point of Taxation Rules, 2011. Explanation reads as follow:-
“This rule shall apply mutatis mutandis in case of new levy on services.”
Since, KKC is a new levy therefore, as per rule 5 all payment regarding taxable services received on or after 1st June, 2016; and payment received on or before 31st May, 2016 but invoice has not been issued till 14th June, 2016, will attract KKR.
3. SERVICE TAX PAYMENT UNDER REVERSE CHARGE MECHANISM AND KKR
The Central Government, provides that notification No. 30/2012 – Service Tax, dated the 20th June, 2012, (Notification regarding RCM) shall be applicable mutatis mutandis for the purposes of Krishi Kalyan Cess. In another words, those service recipients, who are paying service tax under RCM shall pay KKR also.
4. Exemption from payment of Service Tax and KKC
Exemption from payment of KKC has been provided to all those taxable services which are either exempt from the whole of service tax by a notification or special order issued under sub-section (1) of section 93 of the Finance Act, 1994 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:
5. Abatement in payment of Service Tax and KKC
KKC 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.
6. Export of Services and KKC
Vide Notification No. 39/2012 – Service Tax dated 20th June, 2012, Rule 6A was inserted in Service Tax Rules, 1994 and rebate of service tax has been given to exporter of taxable services. Now, wef 1st June, 2016, Rule 6A has been amended and rebate of KKR has also been given to exporter of taxable services.
7. SPECIAL ECONOMIC ZONE AND KKC
A SEZ Unit or a Developer of SEZ shall be entitled to refund of KKC.
8. SPECIFIED RATE OF SERVICE TAX AND KKC
Service Provider of booking of tickets for travel by air; an insurer carrying on life insurance business; money exchange and distributor or selling agent of lottery who have option to pay service tax as per rate specified in sub-rule (7), (7A), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994 have further given option to pay KKC at the rate specified in the sub-rules 7E of the Service Tax Rules, 1994.
9. CENVAT Credit and KKC
As per Rule 3 (1a) of the CENVAT Credit Rules, 2004:- A provider of output service shall be allowed to take CENVAT credit of the Krishi Kalyan Cess on taxable services.
As per Rule 3(4) the Cenvat credit of any duty specified in sub-rule (1) shall not be utilised for payment of Krishi Kalyan Cess
As per Rule 3(7)(d) Cenvat credit in respect of Krishi Kalyan Cess on taxable services shall be utilised only towards payment of Krishi Kalyan Cess on taxable services.