UPDATES ON SWACHH BHARAT CESS(SBC)
UPDATES ON SWACHH BHARAT CESS(SBC)
LEVY OF SWACHH BHARAT CESS IN CASES WHERE ALTERNATIVE RATES ARE APPLICABLE AND CLARIFICATION ON SWACHH BHARAT CESS (SBC)”
Service tax is presently levied at alternative rates in respect of service provided by air travel agents, life insurance service, service in relation to sale/purchase of foreign exchange including money changing and service by lottery distributors/selling agents, subject to fulfilment of conditions prescribed under the Service Tax Rules. Option has been provided for levy of Swachh Bharat Cess also at alternative rates in respect of the above mentioned services.
Clarifications on Swachh Bharat Cess
Swachh Bharat Cess will come into effect from 15th November 2015, at the rate of 0.5% on all services, which are presently liable to service tax. This will translate into a tax of 50 paisa only on every one hundred rupees worth of taxable services. The proceeds from this cess will be used for financing and promoting Swachh Bharat initiatives.
Some doubts are being raised with respect to the levy of Swachh Bharat Cess, such as,-
- what would be Swachh Bharat Cess on services where service tax is being paid under the alternative rates of service tax?
- what would be the value of taxable services for computation of Swachh Bharat Cess?
- whether reverse charge mechanism would apply for the levy of Swachh Bharat Cess?
- what would be the point of taxation for Swachh Bharat Cess ?
In this regard, it is clarified that answers to the above queries are in the provisions of sub-section (5) of Section 119 of the Finance Act, 2015 by which all the provisions of service tax as contained in Chapter V of the Finance Act, 1994 have been made applicable to Swachh Bharat Cess. It is, thus, very clear that all the provisions including those related to computation of taxable value, assessment, exemption, payment, penalty applicable to service tax would also apply in respect of Swachh Bharat Cess.The alternate rate of Swachh Bharat Cess would be:
Service Tax Liability (at the alternate rate) X 0.5/14
Levy of Swachh Bharat Cess in cases where abatement is allowed:As regards the taxable value for the levy of Swachh Bharat Cess, it would be the same on which service tax is levied. Swachh Bharat Cess would be calculated on abated value or value arrived at under the Service Tax (Determination of Value) Rules, 2006, as the case may be.
The effective rate of Service Tax including Swachh Bharat Cess would be:
Effective Rate (After abatement) % X 14.5 = %
For example, if rate of abatement is 60% and effective rate of service tax will be
40% X 14.5 = 5.8 %
Cases where Reverse Charge Mechanism is applicable
A person liable to pay service tax on reverse charge basis would be laible to pay Swachh Bharat Cess also on reverse charge basis.
Point of Taxation: As regards Point of Taxation, since this levy has come for the first time and all services (except those services which are in the Negative List or are wholly exempt from service tax) are being taxed, it is a new levy, which was not in existence earlier. Rule 5 of Point of Taxation Rules would be applicable in this case.
Therefore, in case where payment has been received and invoice is raised before the service becomes taxable, i.e., prior to 15th November, 2015, there is no lability of Swachh Bharat Cess.
In case payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise.
Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.
can be sold or traded on stock exchanges. Bonds can be sold or transferred to other persons. Parents can buy bonds in the name of minor children.
As per notification number 21/2015-ST, read with Section 119 of the Finance Act, 2015 and notification number 22/2015-ST, Swachh Bharat Cess (SBC) will come into effect from 15th November 2015, at the rate of 0.5% on all services except services covered under Negative List and services exempt from payment of tax.
Introduction of this new levy has raised doubts in industry regarding its applicability and allied matters. Team DYN has made an attempt to clarify these doubts in form of FAQ in its DYKS-427.
Now, Central Government has issued Notification No. 23/2012-ST, 24/2012-ST and 25/2012-ST to remove uncertainties.
| S. No. | Doubt | Answer | Relevant Notification |
| (i) | Whether SBC would be chargeable on Gross amount charged or on net taxable value in case of abated service? | SBC would be chargeable on net taxable value. | 23/2012-ST |
| (ii) | Whether provisions of reverse charge mentioned under notification number 30/2012-ST would also be applicable in case of SBC? | Yes, all the provisions of reverse charge mentioned under notification number 30/2012-ST would also be applicable on SBC. | 24/2012-ST |
| (iii) | \What would be Swachh Bharat Cess on services where service tax is being paid under the alternative rates of service tax as per provision given under Rule 6 (7), (7A), (7B) or (7C) of Service Tax Rules, 1994? | The person liable for paying the service tax under sub-rule (7), (7A), (7B) or (7C) of rule 6, shall have the option to pay SBC as per following method:(Total service tax liability of relevant calendar month/quarter calculated under sub-rule (7), (7A), (7B) or (7C) of rule)*0.5/14Note: Service provider can also pay SBC as per normal provisions, however, if once SBC paid by exercising special provisions mentioned above then it shall apply uniformly in respect of such services and shall not be changed during a financial year under any circumstances. | 25/2012-ST |
In FAQ CBEC, interalia, clarified that for payment of SBC separate accounting code would be notified shortly in consultation with the Principal Chief Controller of Accounts. These codes are as follows:
| Swachh Bharat Cess (Minor Head) | Tax Collection | Other Receipts | Penalties | Deduct Refunds |
| 0044-00-506 | 00441493 | 00441494 | 00441496 | 00441495 |
| S. No. | Question | Answer |
| 1 | What will be the date of introduction of SBC | 15th November, 2015 |
| 2 | What will be the Effective rate of SBC? | 0.5% of taxable value |
| 3 | Whether SBC would be applicable on exempted service? | No |
| 4 | Whether SBC would be applicable on services covered under Negative List? | No |
| 5 | Whether SBC would be chargeable on Gross amount charged or on net taxable value in case of abated service? | Net Taxable Value |
| 6 | On which value SBC would be calculated in respect of services mentioned under Rule 2A, Rule 2B and Rule 2C of Service Tax (Determination of Value) Rules, 2006 being works contract services, money changing services and restaurant/outdoor catering services? | Value of service arrived after applying provisions given under Rule 2A, Rule 2B, and Rule 2C of Service Tax (Determination of Value) Rules, 2006. |
| 7 | Whether CENVAT Credit of SBC paid on input services can be availed? | No |
| 8 | Whether duty of SBC can be discharged by utilizing CENVAT Credit? | Yes#Rule 3(4) CCR 2004 read with Section 119(2) FA, 1994. |
Rule, 3(4) CCR, 2004 allow utilization of CENVAT Credit for payment of service tax and Section 119(2) of the Finance Act, 1994 provides that SBC shall be levied and collected as service tax. This issue need clarification from CBEC.9What would be Point of Taxation – (Direct Charge)?POT will be determined according to Rule 4#.10What would be Point of Taxation – (Reverse Charge)?POT will be determined according to Rule 7#.11Whether SBC would be applicable where service tax is payable under composition scheme specified under Rule 6 STR, 1994?No specific exemption has been granted in respect of these services, therefore, SBC should be applicable on taxable value. Government should introduce mechanism for calculation of taxable value.12Whether SBC should be disclosed separately in the invoice?Yes13Under which code SBC is required to be deposited?Accounting head is not yet specified.
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