Swachh Bharat Cess
The Swachh Bharat Mission is a large-scale movement which got initiated in October, 2014, with the objective of delivering a clean India. To give a perfect enhancement to this vision, the Government of India initiated a tax which is known as ‘Swachh Bharat Cess’ at 0.5% on all taxable services to fund the Swachh Bharat initiatives. Consequently, the service tax rate including the Swachh Bharat Cess stands at 14.50%. The Cess became effective from November 15th, 2015 and is collected as per the provisions of Chapter VI (Section 119) of the Finance Act, 2015. With the implementation of GST from 1st July 2017, Swachh Bharat Cess in not applicable any more.
It should be noted that the cess for Swachh Bharat was imposed only on those services that are not exempt from service tax.
Features of Swachh Bharat Cess
- Services: The Swachh Bharat Cess is applicable on services like air-conditioned restaurants, road and rail services, insurance premium and lottery services among others.
- Utilization: The proceeds of the Swachh Bharat Cess are pooled into the Consolidated Fund of India for the efficient utilisation to promote the Swachh Bharat movement.
- Invoice: The Swachh Bharat Cess is imposed as a separate item in an invoice. The concerned cess is imposed using a specific accounting code which has a separate account.
- Rate: The Swachh Bharat Cess is not calculated on service tax per service, but it is calculated on the taxable value of a service. The cess is applied at 0.5% on the value of services which are taxable.
- Taxable Services: As per government the notification, Swachh Bharat Cess is applicable on taxable services except those which are fully exempted from service tax.
- Reverse Charge: As per the section 119(5) of the Finance Act, 2015 and Chapter V of the Finance Act, 1994, reverse charge (notification no.30/2012) will applied for the impose of the Swachh Bharat Cess. Rule 7 in the taxation rules explains that the point of taxation is when the Service provider receives the due amount.
- Cenvat Credit: The Swachh Bharat Cess is not integrated in Cenvat Credit Chain. This means that the Swachh Bharat Cess cannot come in as credit from another tax.
- Calculation: Swachh Bharat Cess is based on the value as per Service Tax (Determination of Value)Rules, 2006. The Cess in light of the related services of food or restaurant or joint, with AC Cooling, is calculated at 0.5% of the 40% of the total amount.
- Refund: SEZ Units are entitled to refund Swachh Bharat Cess paid on specific services.
Point of Taxation:
There is no liability of swachh bharat cess in cases where invoice is increased prior to 15th November, 2015.
The Swachh Bharat Cess will be imposed on services provided on or after November 15th, 2015 (invoice and payments which are issued and received on or after the said date)
Swachh Bharat Cess will be imposed on services offered on or after November 15th, 2015 even if the payment is received before the said date and invoice is not issued by November 29th, 2015
Applicability – Date, Tax Rates: Swacch Bharat can only be applied on taxable services.
- Swachh Bharat cess is applicable w.e.f. 15.11.2015
- Swacch Bharat is applicable on the service’s value, with effective service taxes at around 14.5% from 15.11.2015.
- Swacch Bharat is not applicable on the non-taxable services as the exempted services.
- The cess invoice disclosure and payment has to be separate.
Other Important Aspects of Swacch Bharat Cess (SBC)
SBC is also to be paid in the cases where liability of payment of service tax is on the service receiver. Vide notification No. 24/2015-ST, as dated 12.11.2015, the Government has prescribed that the Notification No. 30/2012 – Service Tax, dated 20.06.2012 is also applicable for the purpose of SBC.
There are different taxable services where optional method of payment of services tax is available in terms of Rule 6 of Service Tax Rules, 1994. These are available in respect of,-
- Services for booking of tickets for travel by air (Ref: Sub-Rule (7) of Rule 6 )
- Life insurance (Ref:Sub-Rule (7A) of Rule 6 ).
- Purchase & Sale of Foreign Currency including money changing (Ref: Sub-Rule (7B) of Rule 6).
- Distributor or Selling agent of promotion, Marketing organizing or in any other Matter assisting in Organising lottery (Ref: Sub-Rule (7C) of Rule 6).
In the Budget of 2015, the Central Government introduced a new Cess which is to be called “Swachh Bharat Cess”. The Statutory authority for new levy is contained in the Section 119 (Chapter VI) of the Finance Act, 2015. It was levied for the purpose of financing and promoting Swachh Bharat Initiatives or for any of the purpose relating thereto.