After Swach Bharat Cess, Govt Imposes Krishi Kalyan Tax On Services From June 1st

The Logical Indian

May 27th, 2016

Source: Economic Times | Image Courtesy: rediff ibtimes

What is a Cess?
It is a tax levied by the government to fund some special purpose.

What is a Krishi Kalyan Cess?
It is a tax collected by the government  levied on the service tax we pay to enhance and finance the agricultural facilities.

The News-
Budget 2016-2017, the Finance Act, 2016 under chapter VI  has proposed an extra 0.5 % of Krishi Kalyan Cess over the taxable services effective from June 1, 2016, increasing the previous service tax of 14.5% to 15 %.Approved by the Government of India on May 14, 2016, the tax levied under Krishi Kalyan cess is exclusive of Swachh Bharat Cess.

Objective and Particulars –

Service Tax                              14%

Swachh Bharat Cess               0.5%

Krishi Kalyan Cess                  0.5%

Total                                           15%

As per govt., the objective of the KKC is to gather funds for improving the agricultural activities in order to lend aid to farmers eventually and  in a country where the occupation of farming is paramount. The KKC is an added cess on any service tax  leviable on taxable services under chapter V of Finance Act.

So, from June 1, you will have to pay 15% on transactions related to any of the taxable services.

Impacts and Facts-

  • Any service provider which charges service tax cannot show 15% as a whole service tax, The KKC must be accounted separately on account books and charged separately on invoices. In the case of payment via challan, a separate accounting code will be notified .
  • The collection from KKC will first be credited to the Consolidated fund of India and Central Government after due appropriation made by Parliament by law in this behalf , utilise such sums of money of the Krishi Kalyan Cess for such specified purposes, reported by Economic Times.
  • Cenvat Credit of KKC is available but must be utilized only for payment of KKC.
  • Owing to the Point of Taxation rules, chapter V, the new KKC cess is applicable on those services whose bill has been generated before June 1,but money is to realized after June 1 from the consumer.
  • For the customers whose billing cycle is similar to this scenario will have to pay an extra charge equivalent to a raise of 0.5% in their service tax.
  • According to some Experts in the field, the case in which the services have been already provided but the payment is yet to be obtained then the fact that the henceforth payment will include the new KKC cess holds illogical on the part of consumers .
  • As informed by Economic Times owing to a talk with an executive of a company,the director explains the dilemma “If I raise an invoice on May 1, I cannot include KKC in that bill. My customer is given a 40-day period for payment of the bill. Thus, as of June 1, the bill will typically remain unpaid and KKC will apply. The cess will have to be borne by our company as a customer is unlikely to pay for a tax which cannot be included in the original bill.”  

Applicability Of KKC-

Particulars Services provided before June 1 Invoice Raised before June 1 Payment made before June 1 Applicability of KKC
Case 1 yes yes yes no
Case 2 yes no yes no
Case 3 yes yes no yes
Case 4 yes no no yes

The Logical Indian Take

In last two years, this is the third time the government has put the burden on common men. On June 1, 2015, last year, govt. hiked service tax from 12.36 per cent to 14 per cent. Then came the Swachh Bharat Cess at 0.5 per cent from November 15 last year. Now, with the Krishi Kalyan Cess the total service tax stands at 15 per cent.

We welcomed the Swachh Bharat cess hoping to see changes on the ground and we hope this time farmers are paid their due and we don’t see anymore farmer’s suicide.


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