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Impact of imposition of Swachh Bharat Cess on various services: FAQs

Service Tax - By: - ashish chaudhary - Dated:- 10-11-2015 Last Replied Date:- 16-11-2015 - Finance Act 2015 had provided provision for levy and collection of Swachh Bharat Cess (SBC) under section 119 of the Finance Act, 2015 at a rate not exceeding two percent on the value of services. The levy was to become effective from the date to be notified by the Government. The objective of behind introducing SBC was to fund for Government s flagship program of Swachh Bharat. Incidentally, it was also s .....

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2015-ST has been issued whereby exemption has been granted in excess of SBC calculated at the rate of 0.5 percent of the value of taxable services. Effectively, rate of cess would be 0.5% and new rate of service tax would be 14.5%. There would be consequential impact on many other aspects under services tax law which the author has attempted to discuss in FAQ form. 1. What would be effective rate of service tax post introduction of SBC? Effective rate of service tax post introduction of SBC woul .....

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manner as apply for service tax. Hence, the effective rate of tax on all abatement services would be 14.5% * effective rate under Notification 26/2012-ST. For GTA, it would be 14.5%*30%= 4.35% (not 4.70%) 3. In case of works contract, how would the tax be calculated? The value of services would be calculated as per Rule 2A of Service Tax (Determination of Value) Rules, 2006. Tax needs to be applied on the value so arrived at the rate of 14.5%. Effective rate of tax in case of original works and .....

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x the special rates are applied. However paper writer feels that there may be consequential amendment to deal with it. 5. I am paying service tax on few services under reverse charge mechanism. How would SBC have impact on my tax liability? SBC would be applicable on all taxable services. Hence, you need to pay SBC along with service tax on the services availed by you. 6. Whether SBC needs to be collected and paid separately from service tax or subsumed in existing service tax rate? SBC would be .....

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/2015 that SBC would not be applicable on services exempted from levy of service tax. Hence, you need not to charge SBC on the services covered by mega exemption notification. Similar would be treatment of negative list services. 8. If services have been provided prior to 15th November but invoiced on or after 15th November, whether SBC would be applicable? (no advance received) There is anomaly between section 67A of the Finance Act, 1994 and Rule 4 of Point of Taxation Rules, 2011. As per sect .....

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uld be rate of tax where services are provided before and after imposition of SBC? The impact of introduction of SBC on different situations is summarized below. (assuming that applicable rate is determined as per Rule 4 of Point of Taxation Rules, 2011) Service provided Invoice issued Payment received Rate to be considered Before imposition of SBC After imposition of SBC After imposition of SBC 14.5% Before imposition of SBC Before imposition of SBC After imposition of SBC 14% Before imposition .....

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point of taxation as per Rule 7 of Point of Taxation Rules, would be the date on which consideration is paid to service provider. Hence, SBC would also be required to be paid in such cases. 11. Whether SBC paid on input service would be eligible as credit? There is no amendment in the Cenvat Credit Rules, 2004 regarding availment and utilisation of SBC. In the absence of the same, credit would not be admissible. (Are we really moving toward GST regime where it is claimed that there would be no c .....

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u will have to factor in additional cost of 0.5% on all services received by you in the course of manufacturing. Similarly, if you are providing taxable service, SBC paid on all your input service become cost. If you are exporter of goods or service, you will not be entitled for refund of SBC. 13. I am providing both exempted and taxable service and reversing credit @ 7% of value of exempted service under Rule 6 of Cenvat Credit Rules? Do I need to reverse the SBC also? SBC would be levied and c .....

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ing of excisable goods. Conclusion Though the objective of the collection of specific cess for a Swachh Bharat Mission is appreciable, the psychological impact on common man would be high with increased burden of taxes. This is especially with the fact that there is no provision for credit (unless it is provided for) and also additional burden on the business man to keep track of the one more tax, as to invoicing, record keeping, payment and returns filing. You can reach authors at madhukar@hire .....

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