A
very careful reading to the aforesaid section make it crystal clear that the
Swachh Bharat Cess is levied & collected as service tax and all the
provisions as to levy and collection of service tax on taxable service is
applicable to Swachh Bharat Cess.The Government, vide Notification No. 21/2015 – ST dated 06th
November, 2015 notified the levy of SBC on all taxable
services w.e.f 15th November, 2015. Besides vide issuance
of Notification No 22/2015 granted an
exemption in respect of Swachh Bharat Cess (hereinafter called SBC).
Undoubtedly,
the levy of SBC has made the Indian industry into dilemma in regard to the
compliance of norms contained in Chapter V of the Finance Act, 1994. But the
only solace is that SBC is 0.5% only due to an exemption and not 2% as the
enactment says. In this regard, the CBEC has tried to clarify much of the
issues pertaining to it which are placed here-in-below for easy of reference:
A
Cess which shall be levied and collected in accordance with the provisions of
Chapter VI of the Finance Act, 2015 called Swachh Bharat Cess, as service tax on
all the taxable services at the rate of 0.5% of the value of taxable
service. SBC is not a cess on Service Tax.
SBC
would be calculated in the same way as Service tax is calculated. Therefore,
SBC would be levied on the same taxable value as service tax.
Date
of implementation of SBC
Notification No 21/2015-ST dated 6th November, 2015 notifies 15th day of November, 2015 as the date from which
provisions of Swachh Bharat Cess will come into effect.
Will
SBC be leviable on exempted services and services in the negative list
The
Central Government vide notification No 22/2015-ST
dated 6th November 2015, has notifiedthat SBC shall be
applicable on all taxable services except services which are either fully
exempt from service tax under any notification issued under section 93(1) of
the Finance Act, 1994 or are otherwise not leviable to service tax under
section 66B of the Finance Act, 1994.
In
other words, it is not leviable on services which are fully exempt from service
tax or those covered under the negative list of services.
Is
SBC be required to be mentioned separately in invoice
SBC
would be levied, charged, collected and paid to Government independent of
service tax. This needs to be charged separately on the invoice, accounted for
separately in the books of account and paid separately under separate
accounting code which has been notified vide Circular
No. 188/7/2015-ST dated the 16th November, 2015.
Besides
that SBC may be charged separately after service tax as a different line item
in invoice. It can be accounted and treated similarly to Education cesses.
Calculation
of SBC for services under reverse charge mechanism (RCM)
The
very popular Reverse Charge Mechanism wherein the liability has been shifted
from service provider to the service recipient to pay service tax under section
68(2) of the Finance Act, 1994. In regard to RCM, it would be pertinent to note
that the provisions of Chapter V of the Finance Act, 1994, and the rules made
thereunder are also applicable to SBC as per section 119 (5) of the Finance
Act, 2015 mentioned above in relevant extract. Thus, the reverse charge under
section 68(2) of the Finance Act, 1994, is made applicable to SBC.
The
same has been clarified vide notification No.
24/2015-Service Tax dated 12th November, 2015 to provide that
reverse charge under notification
No.30/2012-Service Tax dated 20th June, 2012 shall be applicable for
the purpose of levy of Swachh Bharat Cess mutatis mutandis.
Calculation
of SBC for services where abatement is allowed
Taxable
services, on which service tax is leviable on a certain percentage of value of
taxable service, will attract SBC on the same percentage of value as provided
in the notification No. 26/2012-ST, dated 20th
June, 2012. Accordingly, the same shall apply for the purpose of SBC
as enumerated here-in-below for ease of reference:
|
Taxable Service
|
Abatement%
|
Taxable%
|
Service Tax%
|
Swachh Bharat Cess%
|
|
Services in relation to financial
leasing including hire purchase
|
90
|
10
|
1.40
|
0.05
|
|
Transport of goods by rail
|
70
|
30
|
4.20
|
0.15
|
|
Transport of passengers by rail
|
70
|
30
|
4.20
|
0.15
|
|
Bundled service by way of supply
of food or any other article of human consumption or any drink, in a premises
|
30
|
70
|
9.80
|
0.35
|
|
Transport of passengers by air
·
Economy Class
·
Other than Economy Class
|
60
|
40
|
5.60
|
0.20
|
|
40
|
60
|
8.40
|
0.30
|
|
|
Renting of hotels, inns, guest
houses, clubs, campsites or other commercial places meant for residential or
lodging purposes.
|
40
|
60
|
8.40
|
0.30
|
|
GTA Services
|
70
|
30
|
4.20
|
0.15
|
|
Renting of any motor vehicle
designed to carry passengers
|
60
|
40
|
5.60
|
0.20
|
|
Transport of goods in a vessel
|
70
|
30
|
4.20
|
0.15
|
|
Services by a tour
operator in relation to,-
·
a package tour
· a tour, if the tour operator is providing services solely of arranging or booking accommodation for any person in relation to a tour
·
any services other than specified at (i) and (ii) above.
|
75
|
25
|
3.50
|
0.125
|
|
90
|
10
|
1.40
|
0.05
|
|
|
60
|
40
|
5.60
|
0.20
|
|
|
Construction of a complex,
building, civil structure or a part thereof, intended for a sale to a buyer,
wholly or partly except where entire consideration is received after issuance
of completion certificate by the competent authority
|
75
|
25
|
3.50
|
0.125
|
|
Residential properties having a
carpet area above 2000 sq ft and where amount charged is equal to or more
than Rs. 1 crore
Commercial properties.
|
70
|
30
|
4.20
|
0.15
|
Is
CENVAT Credit of the SBC is available
No.
SBC is not integrated in the Cenvat Credit chain. Now the basic question which
puts many minds in dilemma is why it is not Cenvatable when the relevant
extracts of Section 199(2) states the same needs to be treated as service tax?
The Cenvat Credit Rule 2004 allows the provider of output service to CENVAT
credit of service tax leviable under section 66A and 66B of the Finance Act,
1994 & since the levy of SBC is designed under Section 119 of the Finance
Act 2015, the CENVAT credit of SBC cannot be allowed.
Therefore,
credit of SBC cannot be availed. Further, it would be relevant to note that SBC
cannot be paid by utilizing credit of any other duty or tax.
Refund
of Swachh Bharat Cess for Expoters
|
Refund Under
|
Eligibility for Refund
|
|
Rule 5 of CCR r/w N.No
27/2012-CE(NT)
|
Not eligible
|
|
Notification
No.39/2012-ST
|
Eligible as specifically grants rebate of Service Tax & Cess
|
|
Notification No.
41/2012-ST
|
Not eligible as grants rebate only
of Service tax.
|
Point
of taxation for Swachh Bharat Cess
Point
of Taxation Rules, 2011 contains several rules, but it needs to be seen which
Rules there under gets triggered by this levy of Swachh Bharat Cess.
Rule
3 determines POT for tax payable
under straight charge.
Rule
4 of POT does not get triggered in
the instant case as Section 65B(50) defines “tax” to mean
service tax leviable u/s 66B of the Act & since SBC is a cess levied u/s
119 of the Act and not a tax levied u/s 66B of the Act. Hence, levy of SBC does
not amount to change in effective rate of tax.
Rule
5 of the Point of Taxation Rules
would be applicable in this case since this levy has come for the first time on
all services except those services which are in the Negative List or are wholly
exempt from service tax. SBC, therefore, is a new levy, which was not in
existence earlier. It has been endeavored to place the provisions in this
regard in tabular for ease of reference:
|
SBC Leviable or Not
|
Completion of Service
|
Invoice
|
Payment
|
|
SBC
|
Before
|
Before
|
Before
|
|
SBC
|
On/after
|
After 14 days
|
Before
|
|
No SBC
|
On/after
|
Within 14 days
|
Before
|
|
No SBC
|
Before
|
Before
|
Before
|
|
No SBC
|
On/after
|
Before
|
Before
|
#Effective
date in the above data is 15th November, 2015
#14th
day is 29th November, 2015
Rule
7 determines POT in respect of
Reverse Charge Mechanism (‘RCM’) on transactions with associated enterprise
(service provider located outside India) and also on transactions with other
parties.
RCM
on transaction with associated enterprise:
|
Date of entry in books of account
|
Invoice date
|
Payment date
|
POT
|
SBC Levied or not
|
|
10th Nov 2015
|
15th Nov 2015
|
30th Nov 2015
|
10th Nov 2015
|
No SBC
|
|
15th Nov 2015
|
6th Oct 2015
|
30th Nov 2015
|
15th Nov 2015
|
SBC
|
|
15th Nov 2015
|
15th Nov 2015
|
10th Nov 2015
|
10th Nov 2015
|
No SBC
|
RCM
on transaction with other parties:
|
Invoice date
|
Payment date
|
POT
|
SBC levied or not
|
|
10TH Sep 2015
|
10th Nov 2015
|
10th Nov 2015
|
No SBC
|
|
10TH Sep 2015
|
15TH Nov 2015
|
15TH Nov 2015
|
SBC
|
|
10TH Sep 2015
|
25TH Dec 2015 payment
is not made within 3 months
|
11th Dec 2015 The date
immediately following end of 3 months
|
SBC
|
Calculation
of Service Tax and SBC on services covered under Rule 2A, 2B or 2C of Service
Tax (Determination of Value) Rules, 2006
The
tax (Service Tax and SBC) on services covered by Rule 2A, 2B or 2C of Service
Tax (Determination of Value) Rules, 2006, would be computed by multiplying the
value determined in accordance with these respective rules with [14% + 0.5%]
which is displayed here-in-below for the ease of reference:
|
Valuation rule
|
Taxable Value %
|
Service Tax %
|
SBC
|
|
Original Works Contract – Rule
2A(ii)(A)
|
40
|
5.60
|
0.20
|
|
Other contracts – Rule 2A(ii)(B)
|
70
|
9.80
|
0.35
|
|
Money changing – Rule 2B
|
Specified Value
|
14% of specified value
|
0.5% of specified value
|
|
Restaurant – Rule 2C
|
40
|
5.60
|
0.20
|
|
Outdoor Catering –Rule 2C
|
60
|
8.40
|
0.30
|
Is
SBC applicable on services covered by Rule 6 of Service Tax Rules i.e. air
travel agent, life insurance premium, purchase and sale of foreign currency and
services by lottery distributors/selling agents
A
new Sub-rule (7D) to rule 6 has been inserted vide notification 25/2015-Service Tax, dated 12th November, 2015
so as to provide that the person liable for paying the service tax under sub-6
rule (7), (7A), (7B) or (7C) of rule 6 of Service Tax Rules, shall have the
option to pay SBC as determined as per the following formula:-
Service
Tax liability [calculated as per sub-rule (7), (7A), (7B) or (7C)] X 0.5%/14%. In this regard, it would be relevant to note that the
option under this sub-rule once exercised, shall apply uniformly in respect of
such services and shall not be changed during a financial year under any
circumstances.
Is
a person providing both exempted and taxable service and reversing credit @ 7%
of value of exempted service under Rule 6 of Cenvat Credit Rules, does he need
to reverse the SBC also
NO.
Reversal of SBC is not required under Rule 6 of Cenvat Credit Rules, 2004 as
SBC is not integrated in the Cenvat Credit chain.
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