The Union Budget, 2016 proposes in Finance Bill, 2016 to impose a new Cess, called the Krishi Kalyan Cess, @ 0.5% on all or any taxable services. 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. Clause 158 in Chapter VI of the Finance Bill, 2016 contains the proposed statutory provision on KKC.
Unlike Swachh Bharat Cess imposed w.e.f. June 15, 2015, which is not Cenvatable neither in the hands of service providers nor manufacturers, in terms of TRU F.No. 334/8/2016-TRU dated February 29, 2016 [Para 3.1], it is provided that Cenvat credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.
However, corresponding to such entitlement of Cenvat credit of Krishi Kalyan Cess as stated in the TRU letter, changes are yet to be incorporated in Rule 3 of the Cenvat Credit Rules, 2004 to provide requisite legal backing for availment of Cenvat credit.
With introduction of Krishi Kalyan Cess at 0.5% w.e.f June 1, 2016, effective rate of Service tax would eventually go up to 15%. Credit of KKC paid on input services shall be allowed to be used for payment of KKC on output services rendered by the service provider. For this purpose the Government has to amend CENVAT Credit Rules.
In case ST is paid on full value ST will be charged @15% and in case abatement is available on services provided KKC @.5% will be calculated on the abated value of Service, e.g. in case ocean freight is paid to the transporter based in India, following ST will be charged:
|
Sr. No. |
Particular |
Tax Head w.e.f 1st June 2016 |
Tax Rate |
|
1. |
Tax on import freight |
Service Tax (Abatement @70%) Swachh Bharat Cess Krishi Kalyan Cess Total Tax |
4.2% 0.15% 0.15% 4.5% |
