Sweeping Brooms to Sweeping Pockets: Swachh Bharat Cess

Ankit Rajgaria

The government the other day notified 0.5% Swachh Bharat Cess vide Notification No. 22/2015-Service Tax dated 06.11.2015 w.e.f 15.11.2015 encompassing all the taxable services and making the services dearer for the end consumers this Diwali. Here are some handy points on Swachh Bharat Cess :

• The Finance Minister in his budgetary session earlier in the year mentioned, in Chapter VI of the Finance Bill’2015, Swachh Bharat Cess to be the next move to garner funds for the newly launched programme. It read as follows:

“There shall be levied and collected in accordance with the provisions of this Chapter , a cess to be called the Swachh Bharat Cess , as service tax on all or any of the taxable services at the rate of two per cent on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto”.

• This 0.5% cess is over and above 14% i.e. rate of Service tax will 14.5% (inclusive of SBC).
• The government settled for aforesaid rate as the cess is applicable to all the services and not handpicked services, which was duly mentioned in Finance Bill’2015.
• The strategic reason for rolling the scheme encircles the sanitation needs of the country and expenditure regarding the same under the Swachh Bharat Programme.
• It is speculated that the annual requirement of the sanitation if budgeted can tantamount to Rs. 8000 crores (approx.) annually and hence, the cess.
• According to reports of CNBC-TV18, the accruals from the cess would be around Rs.300 crores to Rs.350 crores in these four months and can add upto Rs.10500 crores to the exchequer annually.
• It is pertinent to note that even the ministry officials assert the fact the sanitation requirement till 2020 would amount to Rs.50, 000 crores.
• As far as the increase in service tax to 14% and now the SBC of 0.5% is concerned, several dailies reported it to be a step towards the GST regime where the percentage is likely to fall between 16% to 18%.

Moreover, presenting the cess as brand new welfare tool the Finance Minister added that the Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat and the proceeds from this cess will be exclusively used for Swachh Bharat initiatives and related purposes.

Food of Thought:

• What is the need for the cess when we actually have GST to implement in April’2016 as the government claims?
• Considering it as welfare tool for once, couldn’t the government devise other options which had its impact to public at a large rather than a compulsory imposition of the cess on the services availed by the end consumers?
• The Education cess and Secondary & Higher education cess also was introduced with the an intent of promoting better educational facilities in the country from length to breadth but we witness the present situation ourselves. Will imposing swachh bharat cess on the footsteps of the aforesaid have the same fate as the educational facilities of our country? A big question indeed.
• Last but not the least, an ambiguous stand on availment of credit of such cess is been noted by several officials, authors and website which we expect to be clarified at the earliest.

The initiative is an initiative till the country’s population contributes to it voluntarily and selflessly but a compulsion or imposition turns even a great initiative into project where achieving target funds of the prospective balance sheet are the only deliverables.