Effective Rate of Service Tax w.e.f. 15.11.2015: 14.5%
I would like to inform you that consequent upon issuance of Notification No. 22/2015-Service Tax the Central Government has imposed Swachh Bharat Cess on all taxable services @ 0.50% which is over and above existing rate of service tax @ 14% eventually making effective rate of service tax @ 14.50% on all services rendered and/or all invoices raised on or after 15.11.2015. Government has issued notification no.21/2015 levying Swachh Bharat Cess (“SBC”) at the rate of 0.50% effective 15th November, 2015. Therefore the effective rate of service tax stands increased to 14.50% w.e.f. 15th November, 2015 from existing 14%. However it has been clarified that SBC shall not be applicable on exempted or services covered in the negative list of services. We have compiled a questionnaire on this for your information and smooth application of enhanced rate of service tax (effective 15th November, 2015):
For your reference the published Notification is as follows:
Notification No. 22/2015-Service Tax G.S.R. —(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) read with sub-section (5) of section 119 of the Finance Act, 2015 (20 of 2015), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all taxable services from payment of such amount of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the said Act, which is in excess of Swachh Bharat Cess calculated at the rate of 0.5 percent. of the value of taxable services:
Provided that Swachh Bharat Cess shall not be leviable on services which are exempt from service tax by a notification issued under sub-section (1) of section 93 of the Finance Act, 1994 or otherwise not leviable to service tax under section 66B of the Finance Act, 1994.This notification shall come into force from the 15th day of November, 2015. [F.No. 354/129/2015 – TRU]
1. Whether SBC is applicable to all the Services?
Yes – Initially at the time of issuance of Finance Budget 2015, there were indications that SCB would be imposed on few selected services. However the notification issued by government has provided that it shall apply on all the services except the following:
- Negative List of Services under Section 66D of the Finance Act
- Services exempted by a notification issued under sub-section (1) of Section 93 of the Finance Act, 1994 i.e.
– Mega Exempted Services vide Notification No. 25/2012-ST dated June 20, 2012.
– Services exempted as specified to certain extent under the Abatement Notification No. 26/2012-ST dated June 20, 2012.
2. What would be effective rate of service tax post introduction of SBC?
Effective rate of service tax post introduction of SBC would be 14.5%.
3. Whether SBC needs to be collected and paid separately from service tax or subsumed in existing service tax rate?
SBC would be levied, charged, collected and paid to government independent of service tax. This needs to be charged separately on the invoice, needs to be accounted separately in the books of account and needs to be paid separately under separate accounting code which may be notified separately.
4. What would be rate of tax where services are provided before and after imposition of SBC?
The impact of introduction of SBC on different situations is summarized below. (assuming that applicable rate is determined as per Rule 4 of Point of Taxation Rules, 2011)
|Impact of imposition of Swachh Bharat Cess|
|Service provided||Invoice issued||Payment received||Rate|
|Before 15-11-15||On or After 15-11-15||On or After 15-11-15||14.50%|
|Before 15-11-15||Before 15-11-15||On or After 15-11-15||14.00%|
|Before 15-11-15||On or After 15-11-15||Before 15-11-15||14.00%|
|On or After 15-11-15||Before 15-11-15||On or After 15-11-15||14.50%|
|On or After 15-11-15||Before 15-11-15||Before 15-11-15||14.00%|
|On or After 15-11-15||On or After 15-11-15||Before 15-11-15||14.50%|
5. Whether SBC paid on input service would be eligible as credit?
There is no amendment in the Cenvat Credit Rules, 2004 regarding a ailment and utilization of SBC. In the absence of the same, credit would not be admissible. However industry is expecting clarification on this from CBEC.
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