Swachh Bharat Cess

What’s Swachh Bharat Cess:

The Bharat Abhiyan, a mass movement launched on October 2, 2014, aims to work towards a Clean India. The purpose of the movement is to boost sanitation in both urban and rural India. To the end, the Government of India introduced an additional cess known as ‘Swachh Bharat Cess’ at 0.5% on all taxable services to fund Swachh Bharat initiatives. Consequently, the current service tax rate including the Swachh Bharat Cess stands at 14.50%. The Swachh Bharat Cess which came into effect on November 15th, 2015 (Notification no.21/2015) is collected as per provisions of Chapter VI (Section 119) of the Finance Act, 2015. It is important to note that the Swachh Bharat Cess is not levied on services fully exempt from service tax or those which fall into the category of the negative list of services.

Features of Swachh Bharat Cess:

The salient features of the Swachh Bharat Cess are listed below:

  1. Services: The Swachh Bharat Cess is applicable on services such as air-conditioned restaurants, road and rail services, insurance premiums and lottery services among others
  2. Utilization: The proceeds of the Swachh Bharat Cess are pooled into the Consolidated Fund of India for efficient utilisation for promoting the Swachh Bharat movement
  3. Invoice: The Swachh Bharat Cess is charged as a separate item in an invoice. The Swachh cess is paid under a different accounting code and accounted for separately
  4. Rate: The Swachh Bharat Cess is not calculated on service tax per se but on the taxable value of a service.The Swachh Bharat Cess is levied at 0.5% on the value of taxable services
  5. Taxable Services: As per government notification, Swachh Bharat Cess is applicable on taxable services except those which are fully exempt from service tax (as per section 93(1) of the Finance Act, 1994 or those which cannot be levied (as per section 66B of the Finance Act, 1994)
  6. Reverse Charge: As per section 119(5) of the Finance Act, 2015 and Chapter V of the Finance Act, 1994, reverse charge (notification no.30/2012) will apply for the levy of the Swachh Bharat Cess. As per Rule 7 of the Point of Taxation Rules, the point of taxation is when consideration is duly paid to a service provider
  7. Cenvat Credit: The Swachh Bharat Cess is not integrated in the Cenvat Credit Chain. In other words, Swachh Bharat Cess cannot be paid by using credit of any other tax
  8. Calculation: Swachh Bharat Cess is based on the value as per Service Tax (Determination of Value) Rules, 2006. The Swachh Bharat Cess vis-a-vis services related to serving food at a restaurant or joint, with air-conditioning facilities, is 0.5% of the 40% of the total amount.
  9. Refund: SEZ Units are entitled to refund of the Swachh Bharat Cess paid on specific services
  10. Point of Taxation:
  11. The various scenarios for point of taxation are listed below:

    • There is no lability of Swachh Bharat Cess in cases where invoice is raised prior to 15th November, 2015. Also, there is no liability if invoice is raised within 14 days, i.e. before 29th November, 2015
    • The Swachh Bharat Cess will be levied on services provided on or after November 15th, 2015 (invoice and payments which are issued and received on or after the said date)
    • Swachh Bharat Cess will be levied on services offered on or after November 15th, 2015 even if the payment is received before the said date and invoice is not issued by November 29th, 2015
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