Swachh Bharat Cess – Ready Reckoner
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Diwali Gift !!! - Swachh Bharat Cess @ 0.5% on value of all taxable services levied from November 15, 2015
Pursuing with Mr. Narendra Modi’s Dream of Swachh Bharat, in Union Budget 2015, a provision was made for levying a Swachh Bharat Cess (“SB Cess”) on all or any of the services, for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto. However, the SB Cess was to be levied from such date as may be notified by the Central Government after the enactment of the Finance Bill, 2015.
SB Cess now made applicable from November 15, 2015 – Notification No. 21/2015-ST dated November 6, 2015:
After the Hon’ble President had given assent to the Finance Bill, 2015 on May 14, 2015, the Ministry of Finance, Department of Revenue vide Notification No. 14/2015-ST dated May 19, 2015 had notified increase in the rate of Service tax from 12.36% to flat 14% (Subsuming Education Cess and Secondary & Higher Secondary Education Cess) to be effective from June 1, 2015. But SB Cess was left to be notified at a later date.
Now, the Central Government vide Notification No. 21/2015-ST dated November 6, 2015 has appointed November 15, 2015 as the date from which, SB Cess shall be effective. SB Cess would be over and above the present 14% Service tax rate.
SB Cess at the rate of 0.5% will be levied on value of all taxable services – Notification No. 22/2015-ST dated November 6, 2015:
Section 119 of the Finance Act, 2015 (Chapter VI) that contains a provision of new levy of cess called the SB Cess, empowers the Central Government to impose Cess on all or any of the taxable services at the rate of 2% of the value of such services, for the purpose of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
Therefore, the Central Government has also issued another Notification i.e. Notification No. 22/2015-ST dated November 6, 2015 to exempt all taxable services from payment of SB Cess which is in excess of 0.5% of the value of taxable services. In other words, w.e.f. November 15, 2015 ‘SB Cess’ @ 0.5% will be levied on value of all taxable services i.e. the effective rate of Service tax including SB Cess will be 14.5% from November 15, 2015.
No SB Cess on services specified under the Negative List of services or otherwise exempted by a notification issued under sub-section (1) of section 93 of the Finance Act, 1994:
SB Cess now made applicable from November 15, 2015 – Notification No. 21/2015-ST dated November 6, 2015:
After the Hon’ble President had given assent to the Finance Bill, 2015 on May 14, 2015, the Ministry of Finance, Department of Revenue vide Notification No. 14/2015-ST dated May 19, 2015 had notified increase in the rate of Service tax from 12.36% to flat 14% (Subsuming Education Cess and Secondary & Higher Secondary Education Cess) to be effective from June 1, 2015. But SB Cess was left to be notified at a later date.
Now, the Central Government vide Notification No. 21/2015-ST dated November 6, 2015 has appointed November 15, 2015 as the date from which, SB Cess shall be effective. SB Cess would be over and above the present 14% Service tax rate.
SB Cess at the rate of 0.5% will be levied on value of all taxable services – Notification No. 22/2015-ST dated November 6, 2015:
Section 119 of the Finance Act, 2015 (Chapter VI) that contains a provision of new levy of cess called the SB Cess, empowers the Central Government to impose Cess on all or any of the taxable services at the rate of 2% of the value of such services, for the purpose of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
Therefore, the Central Government has also issued another Notification i.e. Notification No. 22/2015-ST dated November 6, 2015 to exempt all taxable services from payment of SB Cess which is in excess of 0.5% of the value of taxable services. In other words, w.e.f. November 15, 2015 ‘SB Cess’ @ 0.5% will be levied on value of all taxable services i.e. the effective rate of Service tax including SB Cess will be 14.5% from November 15, 2015.
No SB Cess on services specified under the Negative List of services or otherwise exempted by a notification issued under sub-section (1) of section 93 of the Finance Act, 1994:
Notification No. 22/2015-ST dated November 6, 2015 further provides that SB Cess shall not be leviable on services which are exempt from Service tax by a notification issued under Section 93(1) of the Finance Act, 1994 or otherwise not leviable to Service tax under Section 66B thereof.
Therefore, SB Cess @ 0.5% will be levied on value of all taxable services except the following:
* Negative List of Services under Section 66D of the Finance Act, 1994
* Services exempted by a notification issued under sub-section (1) of Section 93 of the Finance Act, 1994 i.e.
# Mega Exempted Services vide Notification No. 25/2012-ST dated June 20, 2012.
# Services exempted as specified to certain extent under the Abatement Notification No. 26/2012-ST dated June 20, 2012
Open issues that require immediate clarification from the Board:
It is worth observing that the Government has not provided any further details of the levy of SB Cess. The continuous hike in Service tax rate from 12.36% to 14% and now 14.5% will definitely raise the burden of taxes on the ‘Aam Aadmi’. Further number of issues may crop up if no further clarification is issued, few of which are discussed as under:
a) Accounting head: What will be the accounting head for depositing SB Cess?
b) Availability of Cenvat credit of SB Cess in the hands of Manufacturer or Service Provider: Whether Cenvat credit of SB Cess would be available or not as there is no amendments proposed in the Cenvat Credit Rules, 2004 pertaining to availment of Cenvat credit of SB Cess?
c) Calculation of value of taxable services under Abatement Notification: How SB Cess would be dealt while availing the benefit of abatements by way of an exemption provided vide Abatement Notification No. 26/2012-ST dated June 20, 2012.
For example, under GTA services, presently, abatement of 70% is available and accordingly, Service tax is required to paid on 30% of value of taxable service after exemption (abatement) of 70% as provided under the said Abatement Notification.
Hence, question is arising → What would be effective rate of Service Tax including SB Cess. Whether it would be leviable at 4.2% (i.e. 30% of 14%) + 0.5% = 4.7% or 30% of 14.5% = 4.35%?
As per our understanding, it should be 4.35% as taxable value after abatement i.e. 30% for GTA Service for chargeability of Service Tax and SB Cess would be SAME in terms of sub-section (5) of Section 119 of the Finance Act, 2015, which states that “the provisions of Chapter V of the Finance Act, 1994 and the rules made there under, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made there under, as the case may be.”
However, it is better that a proper clarification is issued in this regard.
d) Treatment of SB Cess on ongoing transactions: With the Service tax rate (including SB Cess) of 14.5% becoming effective from November 15, 2015, there are chances of turmoil being faced by the service provider in respect of the ongoing transactions for which either certain advance payment is received prior to November 15, 2015 but the completion of provision of service may take place post November 15, 2015 or vice versa.
Tussle between Rule 4 of the Point of Taxation Rules, 2011 and Section 67A of the Finance Act, 1994 will again crop up but, we are of the considered view that SB Cess should be levied on value of taxable services rendered on or after November 15, 2015.
With the aim of Mr. Narendra Modi’s Government to introduce GST by April 1, 2016 wherein all the Cesses on goods and services will be subsumed under the GST, the logic of introducing such a levy under the banner of SB Cess just few months before, will definitely create hue and cry among the Trade.
As SB Cess awaits its introduction, in days to come, an immediate detailed clarification on the various aspects of applicability of SB Cess and availability of its credit will surely be welcomed by the industry at large.
Relevant Provisions pertaining to SB Cess in Chapter VI of the Finance Act, 2015:
Therefore, SB Cess @ 0.5% will be levied on value of all taxable services except the following:
* Negative List of Services under Section 66D of the Finance Act, 1994
* Services exempted by a notification issued under sub-section (1) of Section 93 of the Finance Act, 1994 i.e.
# Mega Exempted Services vide Notification No. 25/2012-ST dated June 20, 2012.
# Services exempted as specified to certain extent under the Abatement Notification No. 26/2012-ST dated June 20, 2012
Open issues that require immediate clarification from the Board:
It is worth observing that the Government has not provided any further details of the levy of SB Cess. The continuous hike in Service tax rate from 12.36% to 14% and now 14.5% will definitely raise the burden of taxes on the ‘Aam Aadmi’. Further number of issues may crop up if no further clarification is issued, few of which are discussed as under:
a) Accounting head: What will be the accounting head for depositing SB Cess?
b) Availability of Cenvat credit of SB Cess in the hands of Manufacturer or Service Provider: Whether Cenvat credit of SB Cess would be available or not as there is no amendments proposed in the Cenvat Credit Rules, 2004 pertaining to availment of Cenvat credit of SB Cess?
c) Calculation of value of taxable services under Abatement Notification: How SB Cess would be dealt while availing the benefit of abatements by way of an exemption provided vide Abatement Notification No. 26/2012-ST dated June 20, 2012.
For example, under GTA services, presently, abatement of 70% is available and accordingly, Service tax is required to paid on 30% of value of taxable service after exemption (abatement) of 70% as provided under the said Abatement Notification.
Hence, question is arising → What would be effective rate of Service Tax including SB Cess. Whether it would be leviable at 4.2% (i.e. 30% of 14%) + 0.5% = 4.7% or 30% of 14.5% = 4.35%?
As per our understanding, it should be 4.35% as taxable value after abatement i.e. 30% for GTA Service for chargeability of Service Tax and SB Cess would be SAME in terms of sub-section (5) of Section 119 of the Finance Act, 2015, which states that “the provisions of Chapter V of the Finance Act, 1994 and the rules made there under, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made there under, as the case may be.”
However, it is better that a proper clarification is issued in this regard.
d) Treatment of SB Cess on ongoing transactions: With the Service tax rate (including SB Cess) of 14.5% becoming effective from November 15, 2015, there are chances of turmoil being faced by the service provider in respect of the ongoing transactions for which either certain advance payment is received prior to November 15, 2015 but the completion of provision of service may take place post November 15, 2015 or vice versa.
Tussle between Rule 4 of the Point of Taxation Rules, 2011 and Section 67A of the Finance Act, 1994 will again crop up but, we are of the considered view that SB Cess should be levied on value of taxable services rendered on or after November 15, 2015.
With the aim of Mr. Narendra Modi’s Government to introduce GST by April 1, 2016 wherein all the Cesses on goods and services will be subsumed under the GST, the logic of introducing such a levy under the banner of SB Cess just few months before, will definitely create hue and cry among the Trade.
As SB Cess awaits its introduction, in days to come, an immediate detailed clarification on the various aspects of applicability of SB Cess and availability of its credit will surely be welcomed by the industry at large.
Relevant Provisions pertaining to SB Cess in Chapter VI of the Finance Act, 2015:
THE FINANCE ACT, 2015 – CHAPTER VI
SWACHH BHARAT CESS
“119. (1) This Chapter shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
(2) There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto.
(3) The Swachh Bharat Cess leviable under sub-section (2) shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994 (32 of 1994), or under any other law for the time being in force.
(4) The proceeds of the Swachh Bharat Cess levied under sub-section (2) shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Swachh Bharat Cess for such purposes specified in sub-section (2), as it may consider necessary.
(5) The provisions of Chapter V of the Finance Act, 1994 and the rules made there under, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made there under, as the case may be.”
Govt nod for gold bonds, new monetization scheme
NEW DELHI: The government on Wednesday cleared two moves meant to reduce the import of gold. While the first entails the issue of goldbonds that individuals can invest in instead of buying it in physical form, the second is theGold Monetization Scheme or a new deposit tool meant to help people earn returns on the precious metal lying idle in bank lockers. The gold deposited through this scheme will be re-circulated in the economy, helping cut imports.
Both the proposals were announced in the last Budget . But the returns that the two instruments will offer will only be announced after a few weeks. As a result, investment consultants are advising people to wait for the details to come out.
India is among the top two markets for gold with the demand for bars and coins estimated at 300 tonnes annually as households have traditionally seen it as a safe investment. But the high demand and large quantities of imports distort the trade numbers and put pressure on the current account deficit and, in adverse situations, impacts the exchange rate
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Both the proposals were announced in the last Budget . But the returns that the two instruments will offer will only be announced after a few weeks. As a result, investment consultants are advising people to wait for the details to come out.
India is among the top two markets for gold with the demand for bars and coins estimated at 300 tonnes annually as households have traditionally seen it as a safe investment. But the high demand and large quantities of imports distort the trade numbers and put pressure on the current account deficit and, in adverse situations, impacts the exchange rate
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Investors will have the option to buy sovereign gold bonds instead of physical gold this Dhanteras. Applications for gold bonds will be accepted from November 5 to November 20, 2015, while these bonds will be issued on November 26, 2015, the Reserve Bank of India said.
Here are 10 things to know about gold bonds
1) Sovereign gold bonds will be issued by the Reserve Bank of India. They will denominated in particular amount of gold and linked to the price of the yellow metal. If the price of gold increases, the value of the bond goes up, benefiting investors.
2) Investors can buy a minimum of 2 units or 2 grams and a maximum at 500 grams per fiscal year. The Reserve Bank has fixed the public issue price at Rs 2,684 per gram for the sovereign gold bonds. This means the minimum investment comes to around Rs 5,400. (Read more)
3) Investors will get a fixed rate of interest of 2.75 per cent per annum (payable every 6 months) on the initial value of investment.
4) The gold bonds would also be available in demat format, so investors will not have to worry about storage unlike physical gold.
5) The bonds have a maturity period of 8 years, with exit option from the fifth year. Holdings can be redeemed in multiples of one gram. The redemption price will be based on prevailing gold prices.
6) The bonds will be listed on the exchanges so investors may get an option to exit even before five years if volumes are good.
7) Gold bonds will be sold through banks and designated post offices. They can be used as collateral for loans from financial Institutions.
8) TDS (tax deducted on source) is not applicable on the interest component, but interest earned on gold bonds will be added to the income and taxed. Capital gains will be taxed at tax slab if these bonds are sold before 3 years. If sold after 3 years, capital gain tax of 20 per cent with indexation benefits would apply. Indexation is a process by which the cost of acquisition is adjusted against inflation in the value of asset.
9) Gold bonds offer an exposure to gold while also offering interest, a feature that is not present in other avenues like ETFs and gold mutual funds or even physical gold.
10) Investors should keep their asset allocation in mind before putting their money in gold bonds as gold prices have been on a long term decline.
Source
Times of India, and
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