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LEVY OF SWACHH BHARAT CESS

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 23-11-2015 Last Replied Date:- 30-11-2015 - Backdrop When Finance Act, 2015 was enacted, rate of Service Tax was enhanced from 12% to 14% and both education cesses subsumed in the enhanced rate of Service Tax. Alongwith, a new cess called Swachh Bharat Cess (SBC) was legislated but its levy was deferred due to political reasons. The Union Budget speech in para 121 stated as follows - Introduction of GST is eagerly awaited by Trade and Industry. To .....

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vying SHE cess shall cease to have effect from a notified date after enactment of Finance Act, 2015. i.e. 1-6-2015. Levy of both education cesses will continue to be levied on income tax and customs as these have not been subsumed in tax rates. With focus on clean India, Finance Act, 2015 has introduced 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. According to the Budget speech, ' .....

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ironment 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 have an enabling provision to levy Swachh Bharat Cess at a rate of 2% or less on all or certain services if need arises. This Cess will be effective from a date to be notified. Resources generated from this cess will be utilised for financing and promoting initiatives towards Swachh Bharat . The date from which this amendment would c .....

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hallan under specified code SBC to be paid in cash only, cannot be paid by utilizing cenvat credit No Cenvat credit can be taken for SBC paid Thus, SBC neither cenvatable nor cenvat to be used for paying SBC Everybody contributes for SBC irrespective of small or big service provider SBC not payable on exempt services or services under negative list SBC also payable on Service Tax liability under reverse charge SBC to be charged on abated value where abatements are allowed. Effective Date for Lev .....

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ing that SBC shall be effectively levied@ 0.05 percent (half percent only) on value of taxable services. Effective Rate of Service Tax This would effectively mean that Service Tax burden w.e.f. 15th November 2015 is going to be 14.5 percent (not 14 percent) and that this additional 0.5 percent is neither going to be cenvatable nor can be paid by using the accumulated Cenvat credit. The effective rate of Service Tax including Swachh Bharat Cess would be 14.50 percent. Thus, for every rupees 100 o .....

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