Today we will discuss on Applicability of Swachh Bharat Cess on Service tax whether it will be applicable on negative list , reverse charge mechanism service etc. Also we will discuss on the payment procedure of Swachh Bharat Cess on Service tax
Meaning of Swachh Bharat Cess (SBC)?
It is a Cess which shall be levied and collected in accordance with the provision of Chapter VI of the Finance Act,2015 called Swachh Bharat Cess ,as Service Tax on all Taxable Services at the rate of 0.05% of the value of Taxable Services.
From Which Date SBC is applicable?
SBC is applicable from 15th day of November, 2015 by Notification No.21/2015-Service Tax, dated 6th November, 2015 refers.
Notification in service tax by which SBC is come –
Notification No.21/2015-Service Tax, dated 6th November, 2015 refers.
Effective rate of service tax after introduction of SBC?
The effective rate of service tax will increase from present 14% to 14.5% from November 15, 2015 onward under normal circumstances.
Is Swachh Bharat Cess applicable on Services mentioned in “Negative List” and “Mega Exemption List”.
No. Swachh Bharat Cess is not applicable on Services mentioned in “Negative List” and “Mega Exemption List” as per Notification No. 22/2015 that SBC would not be applicable on services exempted from levy of service tax.
In case of services covered by Abatement, what would be effective rate of tax?
Taxable Services, on which service tax is leviable on a certain percentage of value of taxable service, will attract SBC on the same percentage of value as provided in the Notification No.26/2012-Service Tax dated 20th June, 2012. So, this notification would apply for SBC also in the same manner as it applies for Service Tax.
For instance in case of GTA Service, it would be 14.5%*30%= 4.35% (not 4.70%)
Is Swachh Bharat Cess applicable on Reverse Charge Mechanism (RCM) service?
Yes. SBC would be applicable on all taxable services. Hence, SBC is payable along with service tax on the services availed and covered under reverse charge mechanism.
How Swachh Bharat Cess apply on Works Contract Service
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 other than original works would be 5.8% (14.5%*40%) and 10.15% (14.5%*70%) respectively.
What would be the liability in case of Reverse Charge Services, where services have been received prior to 15.11.2015, but consideration paid post 15.11.2015?
In case of reverse charge services, 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, in such case Swachh Bharat Cess would be payable.
What would 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. If Service provided, invoice issued and payment received any of the two condition apply.
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 of SBC After imposition of SBC Before imposition of SBC 14%
After imposition of SBC Before imposition of SBC After imposition of SBC 14.5%
After imposition of SBC Before imposition of SBC Before imposition of SBC 14%
After imposition of SBC After imposition of SBC Before imposition of SBC 14.5%
Whether SBC would be required to be mentioned separately in Invoice?
SBC would be levied, charged, collected and paid to Government independent of Service Tax. This needs to be charged separately on the invoice, accounted for separately in the books of accounts and paid separately under separate accounting code.SBC may be charged separately after Service tax as a different line item in Invoice.
3) Availability of Cenvat Credit of Swachh Bharat Cess
3.1. Whether Cenvat credit of payment of SBC is permissible under Cenvat Credit Rules, 2004?
No. As Swachh Bharat Cess is levied under Section 119 of the Finance Act 2015 and not under Section 66 of the Finance Act 1994 and there is no amendment in Cenvat Credit Rules, 2004, regarding availment and utilisation of Swachh Bharat Cess (SBC), hence no credit of Swachh Bharat cess can be availed as per Rule 3 of “Cenvat Credit Rules 2004”.
4) Payment of Swachh Bharat Cess
4.1. Whether SBC to be paid by utilising Cenvat Credit or to be paid in cash.
SBC to be paid by mode of cash only and Cenvat Credit cannot be utilised for payment of Swachh Bharat Cess.
4.2. Whether Swachh Bharat Cess needs to be collected and paid separately from service tax ?
SBC would be levied, charged, collected and paid to government independent of service tax. This needs to be charged separately on the invoice, needs to be accounted separately in the books of account and needs to be paid separately under separate accounting code as notified separately.
4.3. Whether separate accounting code to be mentioned in Challans while making payment of swachh bharat cess.
Yes. For payment of SBC , a separate accounting code would be notified shortly in consultation with the Principle Chief Controller of Accounts ,which may be as follows:-
|Swachh Bharat Cess (Minor Head)||Tax Collection||Other Receipts||Penalties||Deduct Refunds|
Swachh Bharat Cess on Service tax to be paid in cash
Now as per recent government circular no 02/2016 central excise an assessee can not use the input cenvat credit for the payment of swachh bharat cess, So now assessee need to pay the swachh bharat cess on cash as per the frequency of payment.
Our comments – It will create additional tax compliance for the business man. He has to pay the small amount in every month or quarter.