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What is Swachh Bharat Cess (SBC)? How we will deal with it?

According to Chapter VI of Finance Act 2015 it contains provisions for levy and collection of Swachh Bharat Cess. Government has notified levy of Swachh Bharat Cess at the rate of 0.5% of the value of taxable services. Swachh Bharat Cess is not leviable on services which are fully exempt from service tax or those covered under the negative list of services. Presently new service tax rate is 14% and rate of SBC is 0.5%. New rate of service tax plus SBC would be 14.5% on all value of taxable services.

Preeti Sharma

According to Chapter VI of Finance Act 2015 it contains provisions for levy and collection of Swachh Bharat Cess. Government has notified levy of Swachh Bharat Cess at the rate of 0.5% of the value of taxable services. Swachh Bharat Cess is not leviable on services which are fully exempt from service tax or those covered under the negative list of services. Presently new service tax rate is 14% and rate of SBC is 0.5%. New rate of service tax plus SBC would be 14.5% on all value of taxable services.

Swachh Bharat Cess is leviable for financing and promoting swachh bharat initiatives or for any other purposes relating thereto. It aims to improve the sanitation in rural and urban areas so that it improve the standard of living of people. Proceeds of the SBC will be credited to the Consolidated Fund of India, and the Central Government may, after due appropriation made by Parliament, utilise such sums of money of the SBC for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.

SBC would be calculated in the same way as Service tax is calculated. Therefore, SBC would be levied on the same taxable value as service tax. No Credit of Cenvat shall be available to assessee. SBC cannot be paid by utilizing credit of any other duty or tax.

In case of reverse charge mechanism: According to provision of finance Act 1994, the liability has been shifted from service provider to the service recipient. As per section 119 (5) of the Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made thereunder are applicable to SBC also. All the provisions shall apply mutatis mutandis. Government has issued a notification for further clarification Notification No. 24/2015-Service Tax.

Whether abatement will be allowed: Swachh Bharat Cess shall be calculated in same as service tax. Where abatement is allowed on service tax, such abatement shall be allowed for calculating Swachh Bharat Cess.

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%) Taxable Rate would be 4.35%

Point of Taxation: According to Rules of Point of Taxation, since this levy has come for the first time, all services are being subjected to SBC for the first time. Therefore, SBC , is a new levy, which was not in existence earlier. Hence, Rule 5 of the Point of Taxation would be applicable in this case. Therefore, in cases where payment has been received and invoice is raised before the service becomes taxable, i.e. prior to 15th November, 2015, there is no liability of Swachh Bharat Cess. In cases, where payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise. Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.

Separate Accounting Code for Swachh Bharat Cess:

Swachh Bharat Cess Tax Collection Penalties
0044-00-506 00441493 00441496

(Author can be reached at preeti111145@yahoo.com)

Categories: Service Tax

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