Swachh Bharat Cess (“SBC”)
The government of India wide Notification has made collection and levy of Swachh Bharat Cess mandatory from the 15th of November 2015.
Question: Who is supposed to collect this cess?
Answer: The cess is to be collected by any person:
• who is presently collecting Service Tax, and
• who may be required to collect Service Tax in the future (i.e. when the value of taxable services provided exceeds Rs. 10 Lakhs)
Question: What is the rate of SBC?
Answer: The government has issued two notifications on 6th November 2015 – one after the other.
• Notification Number 21/2015: SBC shall be levied at the rate of 2% (as per Chapter VI of the Finance Act 2015)
• Notification Number 22/2015: SBC in excess of 0.5% is exempted.
Net effect is that SBC shall be levied and collected at 0.5% itself.
Question: On what value should this rate be applied?
Answer: SBC is levied on the “Value of Taxable Services”.
Example: Consultancy service provided for Rs. 50,000
Service Tax = 50,000 x 14% Rs. 7,000
Swachh Bharath Cess = 50,000 x 0.5% Rs. 250
Total = Rs. 57,250
Hence, even though a “cess” SBC shall not apply on the Service tax amount. Instead it shall be applied on the Value of Taxable Service.
Question: How will ongoing services be effected?
Answer: Assuming that the levy of SBC is considered as a change in effective rate of tax, in the following situations there shall be no levy of SBC:
- If the service has already been provided as on 15th November 2015: Either the bill should have been raised before 15th November 2015 or the payment should have been received before 15th November 2015
- If the service has not been provided as on 15th November 2015: Both the bill should have been raised and the payment should have been received before 15th November 2015
Question: Will SBC apply on all services?
Answer: Swachh Bharat Cess shall not be leviable on services which are
– exempt from service tax by a notification, or
– otherwise not leviable to service tax.
Meaning that SBC shall apply only on those services on which Service Tax applies.
Question: What shall be date of payment of SBC?
Answer: The collection and levy of SBC shall be exactly like that of Service Tax. Even the provisions relating to interest, penalty, refunds and exemptions shall remain the same for SBC as is applicable to Service Tax.
Question: Provisions for a Return on SBC?
Answer: The existing ST-3 return for Service tax might get altered to include provisions for SBC as well.