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SBC Swachh Bharat Cess – Complete Analysis and Calculation

So Now SBC That is Now Widely Known As Swachh Bharat Cess, has Been implemented by the Government. therefore here below get detailed analysis of Swachh Bharat Cess and Know How to Calculate it. Different Situations are shown and Calculation has been Presented, Know how to Calculate Swachh Bharat Cess, Services and Persons on which it is Applicable, Rate, Value, Abatement, Amendment, Sections and everything Else Briefly Explained by the Author.

SBC Swachh Bharat Cess – Complete Analysis and Calculation

The government of India wide Notification has made levy and collection of “Swachh Bharat Cess” mandatory from the 15th November 2015. The following are a few questions and answers in relation to Swachh Bharat Cess, which will possibly cover all the aspects associated directly or indirectly with levy, collection and payment of SBC.

Question 1: Coverage of Services

Will Swachh Bharat Cess 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.

It implies that that Swachh Bharat Cess shall apply only on those services on which Service Tax applies.

Question 2: Coverage of Persons

Who is supposed to collect and pay this cess? Whether a service recipient is also liable to pay Swachh Bharat Cess if the service is falling under Reverse Charge mechanism?

Answer:

Service Provider

The cess is to be collected and paid by any service provider:

i. who is presently collecting and paying Service Tax and

ii. who may be required to collect Service Tax in the future (i.e. when the value of taxable services provided exceeds Rs. 10 Lakhs)

Service Recipient

Swachh Bharat Cess would be applicable on all taxable services. Hence, even if a service is falling under Reverse Charge mechanism, the service recipient is liable to pay SBC. Moreover, unlike service provider, service recipient cannot go for exemption of Rs. 10 Lakhs under Small Service Provider Exemption Notification – 33/2012.

Question 3: Rate

What is the rate of Swachh Bharat Cess ?

Answer:

The government has issued two notifications on 6th November 2015 – one after the other.

i. Notification Number 21/2015: Swachh Bharat Cess shall be levied at the rate of 2% (as per Chapter VI of the Finance Act 2015)

ii. 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 4: Value

On what value, Swachh Bharat Cess would be applied?

Answer:

Swachh Bharat Cess is levied on the “Value of Taxable Services” and NOT on the “Service Tax” component unlike the general character of any CESS.

Example:

Chartered Accountant Service provided for Rs.1,00,000

Particulars

Amount

Service Tax = 1,00,000x 14%

Rs. 14,000

Swachh Bharath Cess = 1,00,000 x 0.5%

Rs. 500

Total Tax

Rs. 14,500

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 5: Effect on Ongoing Services

How will ongoing services be effected?

Answer:

If the Person Liable to Pay Service Tax is Service Provider

The levy of SBC is considered as a change in effective rate of tax in terms of Point of Taxation Rules, 2011.

In the following situations there shall be no levy of SBC for a service provider:

i. If the service has already been provided as on 15th Nov. 2015: Either the bill should have been raised before 15th Nov. 2015or the payment should have been received before 15th Nov. 2015

ii. If the service has not been provided as on 15th Nov. 2015: Both the bill should have been raised and the payment should have been received before 15th Nov. 2015

In any other situation, there shall be levy of SBC along with Service Tax

The impact of introduction of SBC on different situations is as follows as per Rule 4 of Point of Taxation Rules, 2011 (the cut-off date being 15th November 2015):

Date of Completion of Service

Date of Issuance of Invoice

Date of Receipt of Payment

Effective Rate of Service Tax

Before 15th Nov. 2015

After 15th Nov. 2015

After 15th Nov. 2015

14.5%

Before 15th Nov. 2015

Before 15th Nov. 2015

After 15th Nov. 2015

14%

Before 15th Nov. 2015

After 15th Nov. 2015

Before 15th Nov. 2015

14%

After 15th Nov. 2015

Before 15th Nov. 2015

After 15th Nov. 2015

14.5%

After 15th Nov. 2015

Before 15th Nov. 2015

Before 15th Nov. 2015

14%

After 15th Nov. 2015

After 15th Nov. 2015

Before 15th Nov. 2015

14.5%

If the Person Liable to Pay Service Tax is Service Recipient

In case of reverse charge services, point of taxation as per Rule 7 of Point of Taxation Rules, 2011 would be the date on which consideration is paid to service provider.

Hence, there would be no levy of SBC if the consideration is paid to the Service Provider before 15th Nov. 2015. However, if the consideration is paid to the Service Provider on or after 15th Nov. 2015, SBC would be levied along with Service Tax (irrespective of the fact whether the service is provided before 15th Nov. 2015)

Question 6: Effect on Abatement Notification – 26/2012

In case of services covered by abatement, what would be effective rate of tax?

Answer:

Section 119 provides that SBC would be levied and collected as service tax. Further, it provides that provision of Chapter V of the Finance Act, 1994 would apply to SBC as they apply to service tax. The abatement notification is issued under Section 93 of Chapter V of the Finance Act, 1994. Thus, Abatement Notification – 26/2012 would apply for SBC also in the same manner as apply for service tax.

Hence, the effective rate of tax on all Abatement Services would be [14.5% * Effective Rate under Abatement Notification – 26/2012]. For example, the effective rate of tax on GTA service would be [14.5%*30%] = 4.35% (and NOT 4.2%).

It is important to note that the same would be treated as Change in Effective Rate of Tax (Refer Question No. 5)

Question 7: Effect on Special Valuation Rules – Rule 2A / Rule 2C of Service Tax (Determination of Value) Rules, 2006

In case of services covered by special valuation provision (Works Contract Service and Restaurant / Outdoor Catering Service) what would be effective rate of tax?

Answer:

Tax needs to be applied on the value so arrived at the rate of 14.5%. Hence, the effective rate of tax on such services covered by special valuation provision would be [14.5% * Effective Rate under such Special Valuation Provision]. For example, the effective rate of tax in case of original works would be [14.5% * 40%] = 5.8% (and NOT 5.6%) and other than original works would be [14.5% * 70%] = 10.15% (and NOT 9.8%).

It is important to note that the same would be treated as Change in Effective Rate of Tax (Refer Question No. 5)

Question 8: Effect on Composition Schemes – Rule 6(7) / Rule 6(7A) / Rule 6(7B) and Rule 6(7B) of Service Tax Rules, 1994

Whether SBC would be applicable on services covered by Rule 6 of Service Tax Rules (i.e. Air Travel Agent Service, Life Insurance Premium Service, Money Changing Service and Promotion of Lottery Tickets Service)?

Answer:

SBC will NOT be applicable on such services as special rates are given for such services. The writer expects that consequential amendments under the aforesaid rules may come to increase these special rates correspondingly. As of now, the old special rates will continue till any further notification amending these special rates.

Question 9: Invoice, Books of Accounts and Accounting Code

Whether SBC needs to be collected and paid separately from service tax or subsumed in existing service tax rate?

Answer:

SBC (just like EC & SHEC) would be levied, collected and paid to the Central Government independent of service tax.

SBC has to be mentioned separately in Invoice and separately accounting in Books of Accounts as it is being collected for a particular purpose (i.e. Swachh Bharat Abhiyan) and the entire fund collected from the same would be used only and only for the desired purpose.

SBC would be paid separately under a separate accounting code which would be notified very soon (possibly before November end as the next due-date of payment is 6th December 2015).

Question 10: Payment

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 11: Filing of Return

How would be SBC reflected in the Service Tax Return?

Answer:

The existing ST-3 Return for Service Tax would get altered to include provisions for SBC as well. This would be notified sometime later (possibly before 31st March 2016 as the next due-date of filing of return is 25th April 2016).

Question 12: Availing or Booking CENVAT Credit in relation to SBC paid on Input Service

Whether Swachh Bharat Cess paid on Input Service be eligible as CENVAT Credit?

Answer:

CENVAT Credit on Swachh Bharat Cess paid on Input Service will NOT be available as there is no corresponding amendment in the CENVAT Credit Rules, 2004.

Question 13: Using Eligible CENVAT Credit in relation to SBC payable on Output Service

Whether Swachh Bharat Cess payable on Output Service can be paid by using Eligible CENVAT Credit?

Answer:

Eligible CENVAT Credit (for example Service Tax on Input Service) can be used for payment of Swachh Bharat Cess payable on Output Service in terms of CENVAT Credit Rules, 2004 (as SBC is also technically service tax only).

Question 14: SBC on Excise Duty

Whether Swachh Bharat Cess is levied and collected on Excise Duty also just like Service Tax?

Answer:

Swachh Bharat Cess is levied ONLY ON SERVICE TAX. SBC will not be levied on Excise Duty. Thus, the rate of Excise Duty will remain as 12.5% whereas the rate of Service Tax will increase to 14.5%.

YOUR VIEWS AND COMMENTS ARE MOST WELCOME EVEN IF THEY ARE CONTRARY.
Credits: caclubindia

Author: Vishal Jain B. Com., ACA, ACS
Email: [email protected]




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