In Union Budget 2015, Government had issue Swachh Bharat Cess (SB Cess) @ 2% stating the fact that it will be effective from the date to be notified. Notification No. 21/2015-ST dtd. 06-11-2015, notified 15-11-2015, the date from which SB cess would be effective and notification no. 22/2015-ST dtd -6-11-2015 reduced the rate of SB cess to 0.5%.
SB cess would be leviable on value of taxable services and not on service tax amount. This cess is over and above the service tax rate @ 14% making the effective rate is 14.5%( 14% + 0.5%). Impact of SB cess under different scenario are discussed below:
As discussed, SB cess would be leviable on value of taxable services. Hence, all services covered under negative list and wholly exempt services would be out of the preview of SB cess.
Important thing to be noted down is benefit of abatement would not be available to SB cess. Abatement notification no. 26/2012 is only applicable on Section 66B, Section 66B covers service tax rate of 14% not SB cess. Hence, abatement notification is not applicable on SB cess and this cess will be leviable on total value and not abated value.
As per 119(5) of Finance Act, 2015, provision of Chapter V of Finance Act, 2015 would be applicable on SB cess; hence reverse charge mechanism will be applicable on SB cess.
Although the fact that the provision of Chapter V would be applicable on SB cess, still separate amendment require under CCR, 2004 to avail the CENVAT of SB cess or to utilize existing cenvat to pay SB cess. Till the time no clarification received from Government
Notification is silent, whether to show the SB cess separately or not on the invoice. It is advisable to book and show the SB cess separately, it will definitely helps avoiding undue complexities while adjustments and payment. Also, no separate service tax code yet prescribed for SB cess.
Needless to say, lot of clarity and amendments required from government. It would be better if those will come to the earliest; otherwise, it will surely create lot more complexities.