Swatch Bharat Cess
In the budget, 2015, Swatch Barat Cess was proposed to be imposed. The said proposal , was enacted as Chapter VI, Section 119 of the Finance Act, 2015. The sealant features of the said legal provision are as under.
- a) There will be Levy named Swatch Bharat Cess.
- b) It will be levied @ 2% of taxable value.
- c) It will come into force from the date notified.
- d) It will be in addition to Service Tax, already levied.
- e) 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.
Effective Date & Rate
The Government issued Notification No. 21/2015-Service Tax, as per which the aforesaid levy comes into force from 15th November, 2015. By another Notification No. 22/2015-Service Tax, the effective rate of Swatch Bharat Cess, has been notified @ 0.5% of Taxable Value.
Abatement & Reverse Charge
The Government has further amended the Notification No. 26/2012-Service Tax, by Notification No. 23/2015- Service Tax to provide that the Swatch Bharat Cess, will also be levied on the abated value, as Notified, subject to the conditions specified in the conditions specified. The reverse charge mechanism as Notified by Notification No. 30/2012-Service Tax has also been extended to Swatch Bharat Cess, vide Notification No. 24/215-Service Tax.
Optional Scheme for Travel Agents, Insurer etc.
Under Rule 7, 7A, 7B and 7C of the Service Tax Rules, 1994, an optional scheme to Travel Agents, Insurers, Money Changers and Selling Agents of Lotteries is prescribed. As per the said scheme, such persons have option to pay Service Tax computed on their gross receipt, instead of value of their taxable services. The said scheme has also been extended for the purpose of Swatch Bharat Cess vide Notification No. 25/2015-Service Tax. The Swatch Bharat Cess payable will be computed by dividing the Service Tax under the said composition scheme by Twenty Eight. For Example, if a travel agent, under the said optional scheme was liable to pay Service Tax of Rs. 5400/- He will also be liable to pay Swatch Bharat Cess amounting to Rs. 200/-
Point of Taxation
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.
The CBEC has released FAQ on Swatch Bharat Cess, which are available on the website of CBEC. As per the said FAQ’s, as the Swatch Bharat Cess is not integrated in CENVAT Credit Scheme, hence neither its credit is available not it can be paid by utilizing CENVAT Credit. With due regards, the clarification issued by the Board is not in confirmation of the Law laid down by Parliament. The Provisions of Chapter V of the Finance Act, 1994 and the rules made there under applies to the Swatch Bharat Cess also. The CENVAT Credit Rules, 2004 are notified under Section 94 of the Finance Act, 1994, and there for the provisions contained in the said rules, are also applicable to Swatch Bharat Cess. In view of the author, the provisions of the CENVAT Credit Rules, 2004 will be applicable by reading the phrase ‘Service Tax’, in the said rules as ‘Swatch Bharat Cess’ and no more amending Notification is required. But, since the Government has already issued Notification No. 23/2015-ST and 24/2015-ST, which, in the opinion of author, are superfluous and just Clarificatory, It is hoped that Board will take appropriate remedial measures at the earliest.