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LIVING WITH CESSES

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 14-3-2016 - During the course of his Budget Speech on 29th February, 2016 Finance Minister's agenda revolved around transforming India which encompass nine pillars and inter alia, include agriculture and farmer welfare with focus on doubling farmers income in next five years. Not only this, the thrust of tax proposals has been on measures to boost grounds and additional resource mobilization for agriculture, rural economy and clean environment .....

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comes, goods or services. Courts have held that 'cess' and surcharge is nothing but a tax or an additional tax. Various courts have held this view. In case of surcharge, it has been held that surcharge in the context of taxation means an additional imposition which results in enhancement of the tax and the nature of the additional imposition is the same as the tax on which it is imposed as surcharge. [Refer : Sarojini Tea Co. (P) Ltd. v. Collector of Dibrugarh, 1992 (1) TMI 340 - SUPREME .....

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orming part of the general fund. The word 'cess' is only tax and not a mere fee. It is not necessary for the purpose of levy of cess, there should be quid pro quo between the service actually rendered and the amount of tax levied, as it is not a fee but a tax. Shanmugha Oil Mill v. Coimbatore Market Committee, 1959 (4) TMI 26 - MADRAS HIGH COURT [Constitution of India, Art.277]. The word 'cess' means a tax and is generally used when the levy is for some special administrative exp .....

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ear to centre. Though there is no major change in basic tax rates in direct and indirect taxes, the Budget 2016-17 talks of following three cesses- Clean Environment Cess (renamed from clean energy cess) Infrastructure Cess Krishi Kalyan Cess However, to reduce multiplicity of taxes, associated cascading and to reduce cost of collection, the Budget seeks to abolish or scrap 13 cesses levied by various ministries wherein revenue collection is less than ₹ 50 crore in a year. By saying so, Go .....

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nne. Clean Energy Cess On Coal / Lignite / Peat etc @ ₹ 400 per metric tonne W.e.f. 01.03.2016 Budget Target ₹ 26148 crore Cenvat Credit Not allowed To be paid in Cash Authority Clause 232 of Finance Bill, 2016; Notification Nos. 1 and 2/2016-CEC dated 01.03.2016 The rate of cess has been doubled w.e.f. 01.03.2016 as under - Items Existing rate Proposed rate On coal / Lignite / Peat ₹ 200 pmt ₹ 400 pmt Infrastructure Cess In view of the concern over pollution and traffic .....

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ication Notification No. 1/2016-IC dated 01.03.2016 Infrastructure cess has been levied on motor vehicles of heading 8703 of Central Excise Tariff Act as under - Petrol/LPG/CNG driven motor vehicles of length not exceeding 4m and engine capacity not exceeding 1200cc; Diesel driven motor vehicles of length not exceeding 4m and engine capacity not exceeding 1500cc; Other higher engine capacity and SUVs and bigger sedans. Three wheeled vehicles, electrically operated vehicles, hybrid vehicles, hydr .....

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ucture projects. This cess shall be in addition to any other duties of excise chargeable on such goods under Central Excise or any other law and the applicable provisions relating to Central Excise and rules made shall apply to infrastructure cess. The proceeds of infrastructure cess shall be meant for Union and shall not be distributed among states. Krishi Kalyan Cess (KKC) The Budget proposes to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all or any taxable services, proceeds of wh .....

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f Finance Bill, 2016 @ 0.50 percent of value of services W.e.f. 01.06.2016 As Service Tax For Improvement of agriculture and welfare of farmers Cenvat Credit Allowable Budget Target ₹ 5000 crore KKC shall be levied as Service Tax on all or any taxable services at the rate of 0.5 percent on the value of taxable services. KKC has been levied for the purpose of financing and promoting initiatives to improve agriculture or for any other purpose relating to it. KKC shall be in addition to any c .....

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6, i.e. 14% Service Tax, 0.50% Swacch Bharat Cess and 0.5 percent of Krishi Kalyan Cess. Of this, 14.5% shall be cenvatable but 0.50% of SBC not. Since KKC is leviable on all or any taxable services (there may be exemptions to be announced later), it will have an adverse effect on make in India programme and starts ups, besides adding to inflation. It also goes against the philosophy of having an environment of ease of doing business in India. Cesses Scrapped The Budget proposes to scrap as much .....

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