A note on krishi Kalyan Cess

CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com A Note on Krishi Ka lya n C es s In th is write up , I have made an att em pt to e x p la in a b out ‘K rish i Ka ly a n Ces s’ hoping that it wi ll h elp you in your day to day compliance work . T hou gh I have made all efforts to make it error free but it is possible that some error might have crept, if it is so please bring it in my notice and I will definitely remove it. If y ou have a n y su gge stio n to impr ove th is bo ok, y o u are req uested to fo rw ard th e s ame to us. I have compiled this information based on the various material available and this write up is purely fo r informational purpose and sharing knowledge. It is my kind request to go through original statute, notification and circular etc before relying on the matter given here. I f yo u feel th at this has really help ed yo u in im pro vin g your kn ow le d ge or un ders ta n din g of the subj ect mat ter, I req uest you to ta ke fe w m inutes out of your pre cio us time an d pro vid e yo ur va lu abl e fe ed back at “cackbajpai@gmail.com” . Yo ur fe ed back is im port an t an d wi ll h elp in i mpro vin g it . With Thanks: CA C.K.Bajpai CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com Honourable Finance minister in last budget(2015) had increased the service tax rate from 12.36 (including cess ) to 14% . We are at the verge of GST and under GST regime it is expected that rate would be somewhere between 17% -18%, it seems that rate is sl owly moving towards coming GST regime rate, further in November 2015 a new levy naming ‘Swachchh bharat Cess’ also introduced and rate became 14.5% w.e.f. 15 th November 2015. Now in budget 2016, Hon’ble Finance Minister announced & proposed a new cess na med “KRISHI KALYAN CESS’ It would be imposed at the rate of 0.5% on all taxable service. Thus effective rate of service would be 15% from 1 st June 2016. In this write up I am not going to discuss about GST or comparison betwe en GST & present tax structure but just making an effort to understand implementation of Krishi Kalyan Cess (KKC ) in following paragraphs . A Cess is a tax which is collected by the government to be used for a specific purpose. Thus collections from levy of cess can be used only for the purpose for which it has been collected and not for any other purpose, Finance Minister has mentioned in his budget speech that proceeds of KKC would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers . The Finance Minister made the following announcement (vide para 152 of Budget speech) on Krishi Kalyan Cess - "I propose to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers . The Cess will come into force with effect from 1st June 2016. Input Tax credit of this cess will be available for payment of this cess." Thus collection from KKC shall be exclusively used for the benefit of Agriculture & Farmers. Chargeability of KKC Clause 158 of Chapter VI of Finance Bill ( now Act w.e.f 14.05.2016) has levied KKC @0.5% on the value of Taxable service and same shall be effective from 01 st June 2016. If value of taxable service is Rs.100 then tax would be calculated as under:- CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com Particulars Amount in Rs. Value of taxable service 100 Service Tax @14% 14 Add:- Swachcha Bharat Cess @0.5% 0.5 Add:- Krishi Kalyan Cess @ 0.5% 0.5 Total Value including s ervice tax & cess 115 KKC Applicability KKC shall be levied with effect from 1st June, 2016, thus KKC shall be charged on all services provided on or after 1 st June, 2016 Disclosure of KKC on Invoice:- KKC shall be chargeable on invoices separately as KK C like Swachh Bharat Cess. Charging Service Tax @ 15 percent (14% Service Tax, 0.50% SBC and 0.50% KKC) is not legally correct. KKC when abatement is available on the value of service KKC shall be calculated on the value of taxable service after availing the benefit of abatement for example in case of GTA services abatement is 70% thus service tax is leviable on 30% of the value. Say GTA bill amount is Rs.1000/ - Particulars Amount in Rs. Gross value of taxable service 1000 Less:- Abatement@70% 700 Taxabl e Value of service 300 Service Tax @14% 42 Add: - Swachcha Bharat Cess @0.5% 1.5 Add:- Krishi Kalyan Cess @ 0.5% 1.5 Total Value including service tax & cess 45 KKC when liability is under Reverse charge Mechanism The Central Government vide Notific ation No. 27/2016-ST dated May 26, 2016, has amended/clarified that the Reverse Charge Notification shall be applicable mutatis mutandis for the purposes of KKC also. Thus Service recipient liable to pay under reverse charge (Full/partial) shall pay KKC a longwith service tax on his liability portion. KKC when services are exempt or falling under negative list Notification No. 28/2016 -ST dated 26 may 2016 has provided that KKC shall not be leviable on services which are exempt by notification issues under section 93(1) or special order issued CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com under section 93(2) of the Finance Act 1994 or otherwise not leviable to service tax under section 66B thereof. Thus it is cleared that following would not be liable for KKC: - (i) Activity not falling within meaning of ser vice under section 65B(44) of the Finance Act, (ii) Services falling under section 66D of the Act i.e. Negative List, (iii) Service exempted by notification u/s 93(1) 0f the Act i.e. (a) Exempted services under Mega exemption notification ( 25/2012 -ST dated 20.06.2012 a s amended time to time) (b) Abatement value of Service on which certain percentage of the value is exempt through Abatement Notification No 26/2012 -ST dated 20.06.2012 (iv) Services exempted by Special Order under section 93(2) of the Act Determination of value of service for KKC purpose:- For the purpose of KKC, Value of taxable services shall be the value as determined in accordance with the Service Tax Valuation Rules. Thus value be determined first as applicable rule in particular service like in case of works contract, Rule -2A shall determine the value of taxable service then tax shall be calculated thereon. How does KKC 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 15%. Effective rate of tax in case of original works and other than original works would be 6% (15%*40%) and 10.5% (15%*70%) respectively . Payment of KKC: - KKC shall be paid in accounting he ad as given under:- KKC (Minor Head) Tax Collection Other Reciepts (Interest) Deduct Refunds Penalties 0044-00 -507 00441509 00441510 00441511 00441512 CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com CENVAT of KKC:- ( Notification No. 28/2016- CE (N.T.) dated May 28, 2016) The ce nvat cred it o f KK C s h al l b e a va ila ble an d sh all be utilized o n ly for t h e p ayme nt of KKC . Th us, se parat e a cco unts ne ed s to b e mai nta in ed . Cenvat credit in respect of KKC shall be utilised only towards payment of KKC. Point of Taxation for New Levy of KKC: It is pertinent here to note that Explanation 1 & 2 to Rule 5 of Point of Taxation Rules, 2011 (“the POT Rules”) have been inserted w.e.f March 1, 2016. Explanation 1 provides that point of taxation in case of new levy on services shall be governed by Rule 5 of the POT and as p er Explanation 2, new levy or tax shall be payable on all cases other than specified in Rule 5. Rule 5 of the POT covers two specific situations where new levy shall not be payable: 1. Invoice issued and payment received against such invoice before such serv ice becomes taxable; 2. Payment received before the service becomes taxable and invoice has been issued within 14 days of the date when the service is taxed for the first time , Point of taxation in case of new levy on services shall be governed by Rule 5 of P OT R ules . As per the Rule 5 read with explanations, only in two situations (mentioned above), the KKC shall not be payable and in all others, KKC is to be paid. Sl.No Invoice value Invoice date Payment received Date of payment Remark 1 100000 28.05.2016 100000 29.5.2016 KKC not applicable 2 100000 28.5.2016 90000 29.5.2016 No KKC on amount received before 01st June,16 & remaining amount would be taxable if payment received after 31st May 16 3 100000 02.06.2016 100000 29.5.2016 KKC not applicable, because receipt of payment before 1 st June 2016 while invoice issued within 14 days from taxability of service. CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com 4 100000 20.6.2016 100000 30.5.2016 Taxable because requirement of issue of invoice within 14 days from the date of service is not fulfilled 5 Total value of service is Rs.100000 Invoice for Rs.60000 issued on 29.5.2016 100000 30.5.2016 Non Taxable to the extent of 60000 because invoice issed and payment received but remaing payment would be taxable as invoice was issued after 14 days from the date of service rendered /payment received. Point of Taxation for KKC under Reverse Charge:- POT in case of reverse charge is governed by Rule 7 of the POT Rules, In terms of Rule 7 of the POT R ules , point of taxation under reverse charge (except associated e nterprises located outside India), shall be as under: Payment made within 3 months Date of Payment Payment not made within 3 months Date immediately following the end of 3 months In case of associated enterprises, where the person providing the service is located outside India, POT shall be earlier of the following:  Date of debit in the books of account of service receiver;  Date of Payment It would not be out of place here to mention that a proviso has been inserted in Rule 7 of the POT R ules vide Notif ication No. 21/2016 -ST dated March 30, 2016 , to provide that where there is change in the liability or extent of liability of Service tax to be paid under Reverse Charge: Service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the POT shall be the date of issuance of invoice Rebate of KKC fro exports Vide Notification No. 29/2016- ST dated 26.05.2016, it has been notified that w.e.f. 1.6.2016, rebate of duty or Service Tax used in providing taxable services which are exported, under CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com Notification No. 39/2012-ST dated 20.06.2012 shall also be available to Krishi Kalyan Cess (KKC) Refund of KKC to Special Economic Zone (SEZ) Vide Notification No. 30/2016- ST dated 26.05.2016, it has been notified that w.e.f. 1.6.2016, developer of Special Economic Zones (SEZ) or a unit in SEZ under Notification No. 12/2013 -ST dated 1.7.2013 shall be entitled to refund of Service Tax paid on specified services on which ab initio exemption is admissible but not claimed and amount distributed to it as per clause III (a) of Notification. Further, refund of KKC shall also be allowed like that of SBC by multiplying total Servic e Tax distributed to it by sum of effective rates of SBC and KKC and dividing the product by rate of Service Tax as per section 66B of the Finance Act, 1994 CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com Annexures Rate o f Se rvi ce Tax po st 01 .0 6. 2016 i n c ase of A bat ed s er vices S.N o. I ncom e H ead s Rat es E ffe ctiv e Fro m 01.0 6.2 016 Taxable Valu e E ffe ctiv e S T Rate Effe ctiv e S B C Rate Effe ctiv e KK C Rate Total Effe cti v e Tax Rt 1 Services in relation to fin an cial le asi ng 10% 1.40% 0.05% 0.05% 1.50% 2 Transport of Goods in co nta in ers by rail by an y pers on ot her t han di il 40% 5.60% 0.20% 0.20% 6.00% 2A Tra nsp ort of G oods by Rail ot her th an as 30% 4.20% 0.15% 0.15% 4.50% 3 T ra nsp ort of P asse ngers with or without acco mpan ie d belo ngings by Ril 30% 4.20% 0.15% 0.15% 4.50% 4 Bundled service by way of supply of food or a n y ot her article of hu man consu m pti on or any d ri nk, in a prem ises (incl uding hotel, conve nti on c en ter, clu b, p and al, sh amian a or an y ot her place, sp ecially arra nge d for orga nizi ng a fun ctio n) together with renting 70% 9.80% 0.35% 0.35% 10.50% 5 Transport of passe ngers by air with or without acco mpan ie d belo ngings in 40% 5.60% 0.20% 0.20% 6.00% 5A Tra nsp ort of passe ngers 60% 8.40% 0.30% 0.30% 9.00% 6 R en ti ng of inns , h otel s, G ues t hous es, clubs, campsi te s or other com mercial pla ce s f idil 60% 8.40% 0.30% 0.30% 9.00% CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com 7 S erv ic es of good s tr an sp ort agency in r e la t ion to tran sp ort ati on of good s ot her t han hhld d 30% 4.20% 0.15% 0.15% 4.50% Rate o f se rvi ces w here alter nate rate is pro vided po st 01 .06 .2016 S ervi ce Pro vider Services E ffe ctiv e S ervi ce T ax E ffe ctiv e S B C Effe ctiv e KKC Effe ctiv e Total R ate Money Chan ger Services in relation to pu rchase or sale of for eig n c u rre ncy for an amo unt up to 0.14% 0.005% 0.005% 0.15% Services in relation to pu rchase or sale of for eig n c u rre ncy for an amo unt e xc eed in g Rs. 100, 000 but up to r up ees 1000, 000 Rs. 140 + 0.07 % Rs. 5 + 0.002 5% Rs. 5 + 0.002 5% Rs. 150 + 0.07 5% Services in relation to pu rchase or sale of for eig n c u rre ncy for an amo unt di Rs. 770 + 0.01 4% Rs. 27.5 + 0.0005 % Rs. 27.50 + 0.000 5% Rs. 825 + 0.01 5% Lottery Guarantee payout more than 80% Rs 8200 on eve ry R s 10 Lakh (or part t h ere of ) Rs 293 on every Rs 10 Lakh (or part thf) Rs 293 on every Rs 10 Lakh (or part t h ere of ) Rs 8,786 on e very Rs 10 Lakh (or part th ere of ) G uara ntee p ayou t le ss th an 80% Rs 12, 800 on e v ery RS 10 L akh (or part thereof) R s 457 on every Rs 10 Lakh (o r R s 457 o n e very R s 10 L akh ( o r p art t he re o f) R s 13,714 on e very R S 10 L akh (o r p art t he re o f) In su ra nce Fir st y ear o f P ol icy 3.50% 0.12 5% 0.12 5% 3.75% Subse qu en t y ears 1.75% 0.063% 0.063% 1.88% Air Tra v el Dom estic T ra vel 0.70% 0.02 5% 0.02 5% 0.75% Foreig n Tr ave l 1.40% 0.05 0% 0.05 0% 1.50% Effe ctiv e R ate of Se rvi ce T ax post 01 .06. 20 16 i n c ase of V alu ation Pa rtic ular Taxable Valu e E ffe cti v e S ervi ce T E ffe ctiv e S B C Effe ctiv e KKC Total Effe cti v e Tax Rt Work s Co ntr act - Ori gin al Wo rk s 40% 5.60% 0.20% 0.20% 6.00% Works Contract - Others 70% 9.80% 0.35% 0.35% 10.5 0% Restaurant 40% 5.60% 0.20% 0.20% 6.00% CA Chandra Kishore Bajpai B.Com. FCA,LLB. DISA(ICAI) Shop No. 24, Ground Floor, GDA Commercial Complex, Nyay Khand-1, Near Bijali Ghar, Ghaziabad 201014 Mob: - 95600 37408, 7599 03 7599, Email:- contact@cackbajpai.com Outd oor Catering 60% 8.40% 0.30% 0.30% 9.00% Effe ctiv e R ate of se rvi ces i n c ase of r e ve rse ch arg e po st 01 .06.2 016 S.No. Service Rat es E ffe ctiv e Fro m Ju ne 1, 2016 Taxable Valu e E ffe cti v e S ervi ce T Effective S wa c h Bhar at C E ffe civ e K ris h i K aly a C Total ef fe cti v e Tax 1 Rent A Cab - with abatement 40% 5.60% 0.20% 0.20% 6.00% 2 Rent A Cab - without abatement 50% 7.00% 0.25% 0.25% 7.50% 3 Ma npowe r Su pply 100% 14.0 0% 0. 50% 0.50% 15.0 0% 4 S ecu rity Se rv ic e s 100% 14.0 0% 0.50% 0.50% 15.0 0% 5 P ayme nt to Ad voca tes an d L awy ers 100% 14.0 0% 0.50% 0.50% 15.0 0% 6 P ayme nt f or Sp nsor sh ip 100% 14.0 0% 0.50% 0.50% 15.0 0% 7 Tra nsp ort ati on o f Good s By R oad 30% 4.20% 0.15% 0.15% 4.50% 8 P ayme nt to I ndep end en t Dir ect or 100% 14.0 0% 0.50% 0.50% 15.0 0% 9 Wo rk s Co ntr act- For Original Wk 20% 2.80% 0.10% 0.10% 3.00% 9 Wo rk s Co ntr act- For Ot her Wo rk s 35% 4.90% 0.18% 0.18% 5.25% 10 Payment to Arbiteral tribunal 100% 14.00% 0.50% 0.50% 15.00% CORPORATE SEMINARS We believe that in today’s rapidly evolving business scenarios, corporate and business leaders need to stay updated about latest policies, best practices and industry developments. 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