The thrust of Modi Government towards clean India has made the government to impose Swachh Bharat Cess. With the objective of financing and promoting Swachh Bharat initiatives, enabling provisions were made in the Finance Bill’ 2015 to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% of the value of such taxable services. This Cess was to be levied from the date to be notified by the Central Government. Owing to this requirement, the central government issued notifications 21/2015 &22/2015 – ST both dated 6th Nov’ 2015, for the purpose of chargeability of Swachh Bharat Cess w.e.f. 15th Nov’ 2015 on all the taxable services at the rate of 0.5%.
A. Applicability :
The cess is applicable w.e.f 15.11.2015.
B. Coverage of Services :
SBC shall apply only on those services on which service tax applies. i.e SBC shall not be leviable on non taxable services and exempted services.
C. Coverage of Persons :
SBC should be collected by Service Provider and in case of reverse charge mechanism Service receipt is liable to pay SBC.
D. Rate of SBC :
The government has issued two notifications on 6th November 2015 – one after the other.
i. Notification Number 21/2015: SBC 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.
E. Value on which SBC applied :
SBC is levied on the “Value of Taxable Services” and NOT on the “Service Tax” component unlike the general character of any CESS.
F. Effect of SBC :
In case of person liable to pay service tax is service provider, the levy of SBC is considered as a change in rate of service tax and should refer to rule 4 of Point of Taxation Rules, 2011.
In case person liable to pay service tax is service recipient, he should refer to rule 7 of Point of Taxation Rules, 2011
G. CENVAT and SBC :
CENVAT credit on Swacch Bharath Cess is not available. Hence no CENVAT can be claimed on payment of SBC.
H. Disclosure of SBC :
Swacch Bharath Cess has particular objective. This should be disclosed separately on the face of invoice and should pay the same under applicable accounting codes.
For certain services abatement is permitted which means that service tax is levied on a fixed percentage of the value of taxable services. In such cases, SBC will be levied on the value of taxable services after factoring the abatement. For example, in the case of transport of passengers by air (with or without belongings), the abatement is permitted to the tune of 60% under Economy class and 40% under Business class. This means that for economy class, the effective rate of service tax inclusive.