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The enabling provisions for KRISHI KALYAN CESS (KKC) are contained in Chapter – VI of Finance Act’ 2016. As per the provisions, KKC shall be applicable at 0.5% on all taxable services and the proceeds of KKC would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. The Cess […]
Relevant Rules to understand the implication of new levy: i. Rule 4 of Point of Taxation Rules, 2011 (POTR, 2011) – Change in Effective Tax Rate, ii. Rule 5 of POTR, 2011 – Service Taxed for the first time iii. Notification No. 10/2016-ST dated 01st March, 2016 (insertion of explanation in Rule 5)
In this article, we have herein below summarized the amendments made by notifications in service tax law. Cenvat credit on Input Services has now been allowed for the services of transportation of goods by Rail (Other than transport of goods in containers by rail by any person other than Indian Railways). (There is an abatement of 70% for transportation of goods and passengers by rail, still the government allowed the cenvat credit on Input Services.) – S. No 2 of Notification.
it has been notified that w.e.f. 1.6.2016, wherever reverse charge mechanism is applicable in terms of Notification No. 30/2012-ST dated 20.06.2012, the same (reverse charge) shall be applicable mutatis mutandis for the purpose of Krishi Kalyan Cess.
After Collecting cess in the name of Education, Higher Education, Cleanliness (Swachh Bharat Cess) now the government is also keen to put burden of welfare of the Farmers on all of us (Including from the farmers for any service availed by them. Imagine person paying Tax for his own welfare which might not ultimately reach to him !!!!!) so all the person availing any services on or after 1st June,2016 or making any payment for the Services after 1st June,2016 need to make payment of additional 0.5% Cess on the value of Services. It is a move towards reaching neutral rate of GST (Goods & Service Tax) as proposed by the committee of 16% – 18% which most likely as per current situation. (So Government is trying to ensure that people absorb increase in rate in slower installments rather than sudden jump to 16% or 18% which may have practically difficulty in implementation and to reduce oppose at that point of time). Nevertheless to mention the fact that Swachh bharat Cess can be increased upto 2% as passed and provided by the Finance Act,2015. So that hanging sword may hit at any point of time as government may deemed fit and increase our burden more towards Clean India Campaign.
The Krishi Kalyan Cess shall come into force with effect from 1st June, 2016. The said levy has been imposed by the Central Government by exercising its power under Section 161 of the Finance Act, 2016, which specifically indicates that KKC shall be levied and collected as Service tax @ 0.5% on the value of all taxable services.
Pursuing with an objective to finance and promote initiatives to improve agriculture and farmer welfare, the Government announced a new cess namely ‘Krishi Kalyan Cess’ , to be levied at 0.5% on the value of all taxable services w.e.f June 1, 2016. In this regard, a new Chapter VI was inserted in the Finance Bill, 2016, containing relevant provisions, which are applicable with enactment of the Finance Act, 2016 on May 14, 2016.
(7E) The person liable for paying the service tax under sub-rule (7), (7A), (7B) or (7C) of rule 6, shall have the option to pay such amount as determined by multiplying total service tax liability calculated under sub-rule (7), (7A), (7B) or (7C) of rule 6 by effective rate of Krishi Kalyan Cess and dividing the product by rate of service tax specified in section 66B of the Finance Act, 1994
the SEZ Unit or the Developer shall be entitled to refund of- (i) the service tax paid on the specified services on which ab-initio exemption is admissible but not claimed, and (ii) the amount distributed to it in terms of clause (a).
The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) by notification No. 39/2012-Service Tax, dated the 20thJune, 2012 vide number G.S.R. 481(E), dated the 20th June, 2012 and last amended vide notification No. 03/201 6- Service Tax, dated the 3rd February, 2016 vide number G.S.R. 141(E)., dated the 3rd February, 2016.
