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BIRTH OF NEW CESS

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 20-3-2015 Last Replied Date:- 26-3-2015 - We as Indians are habitual of living with levies, taxes and cesses. As if taxes are not enough, the Governments (to whichever political party it may belong) have been levying cesses and surcharge on taxes as additional tax revenue-may be it has a psychological effect on tax payers that tax is low but for the exchequer, it is the effective yield that counts. Presently we have education cess and secondary an .....

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or 'Swachh Bharat' drive. Clean India in Budget, 2015 With focus on clean India, the Union Budget-2015 proposes to have a special cess called 'Swachh Bharat Cess (SBC) over and above Service Tax. This SBC shall be used to finance and promote swachh bharat initiatives. Further, contributions to Swachh Bharat Kosh (SBK) shall be eligible for 100 percent deduction u/s 80G of the Income Tax Act, 1961. Contribution to SBK shall be utilized to improve sanitation facilities in rural and ur .....

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at is not only a programme of hygiene and cleanliness but, at a deeper level, a programme for preventive health care and building awareness. Budget speech in para 123 states as follows - In indirect taxes, I propose to increase the Clean Energy Cess from ₹ 100 to ₹ 200 per metric tonne of coal, etc. to finance clean environment initiatives. Excise duty on sacks and bags of polymers of ethylene other than for industrial use is being increased from 12% to 15%. It is also proposed to ha .....

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it has been stated that - Clause 117 of the Bill seeks to insert a new Chapter VI so as to levy a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services for the purposes of the Union for financing and promoting Swachh Bharat initiatives and any other purpose relating thereto. Statutory provision (Clause 117 of Finance Bill, 2015) (1) This Chapter shall come into force on such date as the Central Government may, by notification in the Official Gazette, app .....

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vices under Chapter V of the Finance Act, 1994, or under any other law for the time being in force. (4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary. (5) The provisions of Chapter V of the Fi .....

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ugh the levy is called cess, it shall be in the nature of tax (service tax) and collected as such SBC shall be levied on all on any of the taxable services SBC shall be levied on all services or some of the services as may be notified. It is expected that to start with, it may be imposed on few services which yield more tax, are in organised sector and collection / monitoring is easier. Later, it may be extended to other services Rate of SBC shall be 2 percent (not 2 percent or less) as menti .....

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swachh bharat initiatives and any other purpose in relation thereto The rate of SBC shall be 2 percent levied on the value of taxable service, not on tax For service providers and service receivers, effective burden of Service Tax where SBC is also levied, shall therefore, be 16 percent (i.e., 14 percent Service Tax and 2 percent SBC). SBC shall be in addition to Service Tax or any other cess on taxable services under Finance Act, 1994 or any other law implying that SBC will not be a substitu .....

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, if a service is exempt from levy of Service Tax, SBC shall also be exempt. Impact of SBC The effective levy of Service Tax alongwith SBC, wherever applicable, shall be 16 percent as also explained in the following table: Tax / duty Present Position As per Finance Bill, 2015 (Without SBC) As per Finance Bill, 2015 (With SBC) Tax EC & SHE Cess Total Tax EC & SHE Cess .....

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us 12.36 ** 16 minus 12.36 On Service Tax front, Government has been too harsh and aggressive as it appears from the target of Service Tax collection itself. From a revised tax target of ₹ 168000 crore in current fiscal, it is aimed to collect Service Tax of ₹ 210000 crore in financial year 2015-16. To achieve this, the budget proposes to mercilessly increase the rate of Service Tax by 2 percent from 12% to 14% a hike of about 17 percent from earlier rate. As if this was not enough, .....

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