The Hon’ble Finance Minister of India Mr.Arun Jaitley had proposed to impose a cess which is known as the Krishi Kalyan Cess (KKC). Subject to the provisions of Chapter VI, Clause 158 of the Finance Bill, KKC is a service tax subject to all taxable services levied at 0.5% of the value of such services, taxable during the Budget 2016, with effect from 1st June 2016
What is a Cess?
According to Article 270 of the Constitution of India, cess is imposed by the Parliament, and levied and collected by the Government of India and distributed between the Union and the States, albeit it is not needed to be shared with the State Governments. A cess is a tax that is levied by the government to raise funds for a specific purpose. Here, the KKC is a cess which shall be levied as a service tax on all taxable services at the rate of 0.05% of the value of taxable Services and collected in accordance with the provisio of Chapter VI of the Finance Act, 2015. With the introduction of this cess, all the funds accrued from it shall be first credited to the consolidated fund of India and further utilized for improving the welfare and agriculture lands of farmers in India.
Application of KKC on Works Contract Services
As per Rule 2(a) of Service Tax (Determination of Value) Rules, 2006 , the application of the KKC on works contract services would be levied on the value so arrived at 15% where such effect rate of tax of original works and other than original works would be 6% (15%* 40%) and 10.5% (15% * 70%) respectively.
CENVAT Credit Rules, 2004 on KKC
The CENVAT credit payment shall be made available and utilized for the payment of KKC. A claim of refund of KKC in service tax is permitted, which is also allowed in the CENVAT Credit. Both Exporters of goods and services garner a refund due to no restriction of its availment.
Mode of Payment of KKC
For the purposes of payment of the KKC, a notification of a separate accounting code would be delivered to establishments (hotels, restaurants etc.) that levy and charge the cess on invoices itself, which in furtherance are paid to the government along with the service tax and swachh bharat cess.
KKC similarity to the Krishi Kalyan Surcharge
Domestic tax payers can render a declaration of undisclosed income of any asset by paying tax at 30%. And surcharge at 7.5% with a penalty at 7.5%, totalling a sigma of 45% of undisclosed income. Thus, earning immunity from prosecution, hence this surcharge levied will called as Krishi Kalyan Surcharge, that is applied for the same purpose as of the KKC.
Calculations of KKC
For the prime purposes of understanding how the KKC is calculated, let’s take an example of the following –
If we take Rs 100 as for the service charged, the Service Tax will be Rs. 14 at 14% rate, here the Swachh Bharat Cess includes a 0.5 % and in the case for the KKC it will also be of Rs. 0.05 at 0.5%.
So the total chargeable amount will be Rs. 115.
|2.||Swachh Bharat Cess||0.5|
|3.||Krishi Kalyan Cess (KKC)||0.5|
Time of issuance of invoice as well as amount of Invoice
Amount of payment received
Position of Taxability
|1.||27.5.2016 for Rs 9,00,000||29.5.2016 for Rs 11,00,000||Not Taxable|
|2.||25.5.2016 for Rs 2,00,000||27.5.2016 for Rs 2,00,000||Not Taxable , Albeit payment made post the 31st of may , then it will be subject to KKC|
|3.||10.5.2016 for Rs2,50,000||12.5.2016 for Rs2,50,000||Not Taxable, as because recival of amount surface 21 days in advance before the due date.|
|4.||14.6.2016 for Rs 2,50,000||20.5.2016 for Rs 5,00,000||Non Taxable to the extent of 6,00,000 because only part payment has been collected before the date of taxation of service or new levy. The Balance Rs 4 Lac, if the remainder of balance paid post the the date of 31st of may then it will be subject to KKC|
|5.||Total consideration was 11 Lacs. On 27.5.2016 invoice was issued for Rs 9,00,000||29.5.2016 for Rs 11,00,000||Non Taxable, as entire payment declared and received before the due date.|