Krishi Kalyan Cess

Example: Amount accrued from irrigation cess shall be utilized only for funding government undertaking related to that. According to Article 270 of the Constitution, central government is not obliged to share the cesses levied by the Parliament for reserved projects with state governments; but it is compulsory for the Centre distribute a chunk of revenue amasses from other taxes with the States. And in case of surplus unspent money in the account, it will merely be taken forward for prospective projects in the next year.

What is the Meaning of Krishi Kalyan Cess (KKC)?

It is a Cess that will be imposed and amassed in compliance with the provision specified in Chapter VI of the Finance Act 2015; A Service Tax on every taxed service at the rate of 0.5 % of the on-paper price of such services.

Estimating Krishi Kalyan Cess

Krishi Kalyan Cess can be toted up just as Service tax and will be charged on the same taxed value of ST. KKC shall not be determined on Service Tax but only on the taxed value of the service rendered. For instance, for a service that cost Rs. 200, the ST will be Rs.28 (at 14 %) and Swachh Bharat Cess (SBC) will be Rs.1 at 0.5 percent. In the same way, Krishi Kalyan Cess will be Rs.1 at 0.5 percent. And the total amount levied will be Rs. 230.

An estimation of the same is shown in the table below: 

Examples to know How Krishi Kalyan Cess is Calculated

Mentioning Krishi Kalyan Cess in Invoice

KKC will be imposed, charged, accrued and disbursed to Government free of Service Tax. This must be charged individually on the invoice, represent distinctly in the accounts books and also paid separately under different accounting code. S BC shall be levied individually after Service tax as a separate line item in the Invoice. Krishi kalyan Cess became applicable from 1st June, 2016. But it cannot be applied on Services specified in the 'Mega Exemption List' and 'Negative List'. According to the Notification Number 22/2015, KKC cannot be applied on services let off from ST. Also, Rule Number 5 of Point of Taxation Rules 2011 shall to be checked for its practicality in the event of current contracts or deals on 1st June 2016. Hence if payment is made before this date, then cess is exempted.

1. Krishi Kalyan Cess must be invoiced separately on the invoice, separately recorded in the accounting records, and also to be paid separately under a different accounting code. 
2. Swachh Bharat Tax is to be levied individually as a separate line item in the invoice after the service tax has been charged. 

1. Krishi Kalyan Cess will not be applicable on the services under 'Mega Exemption List' and 'Negative List'. 
2. According to Notification Number 22/2015, Krishi Kalyan Cess cannot be applied on services let off from Service Tax. 
3. According to Notification Number 26/2012, ST dated June 20, 2012, Krishi Kalyan Cess will be applied to taxed services that are subject to service tax on an exact percentage of their value. 

Effective tax rate if services are covered by Abatement:

Taxed Services, on which service tax is chargeable on a specific share of value of such services, will lure KKC on the exact proportion of value as promised in the Notification Number 26/2012, ST dated 20th June 2012. Similarly, this notice would apply for KKC as well. Example, for GTA service, it shall be 4.5 percent (15 percent multiplies by 30 percent).

KKC and Krishi Kalyan Surcharge Comparison

Krishi Kalyan Cess (KKC), despite the similarity in their names, is as different from Krishi Kalyan Surcharge (KKS) as can be other than the fact that both were declared by the Union Government Budget of 2016-2017. KKS offer a steady and foreseeable tax system and bring down black money. It was declared in the budget that local tax payers can declare private income or such income saved in the form of any property by shelling out tax at the rate of 30 percent, and surcharge (meaning an addition to the present tax) at 7.5 percent and fine at 7.5 percent, which comes up to 45 percent of such 'nameless' income. These declarants will have protection from suit. Arun Jaitley, while reading out the above provision clarified that Surcharge imposed at 7.5 percent of those income will be known as Krishi Kalyan Surcharge, to be utilized for farming and rural economy.

Summing Up:

The underlying principle behind obligation of Krishi Kalyan Cess is noble with an aim to develop inclusive agricultural economy, which makes up about 16 percent to our GDP. But it does not help much to the numerous government undertakings intended to simplify the business and commercial processes. Government should afford adequate motivation to worthy schemes like Startup India, Make in India etc. and help to bring in transparency and ease for business aspirants. KKC is expected to impede these enterprises while adding to the overall production costs and subsequently price hikes. While government do take effort to initiate Goods and Services Tax (GST) in India soon, the rationale of presenting new taxes yearly under the banner of new and diverse Cesses, appears to be needless at this juncture.