Swachh Bharat Cess is an additional levy of 0.50% on all the taxable services with effect from 15th November, 2015. This Swachh Bharat Cess will be added in the service tax rate which makes effective service tax rate of 14.50% and all the taxable services which will be provided on or after 15th November, 2015, will be chargeable with new service tax of 14.50% including Swachh Bharat Cess. This additional levy translates into tax of 50 paise on every hundred rupees worth of taxable services. Let’s understand Swachh Bharat Cess in detail.
Budgeted Expenditure on health in India is around Rs.6,700 crore annually which translates into approximate Rs.55 per capita. With Swachh Bharat Cess, Central Government aims to involve each and every citizen of India towards making India Clean and healthy. The tax collected from Swachh Bharat Cess will be extensively used for financing and promoting Swachh Bharat initiatives or for any other purposes relating to Swachh Bharat such as building toilets.
Swachh Bharat Cess (SBC) was initially proposed to be at 2 percent on the value of taxable services in the Budget 2015 but the rate has been reduced to 0.50% vide Notification No.22/2015-ST dated 6th November, 2015.
Calculation of Swachh Bharat Cess
Swachh Bharat Cess will be levied only on the taxable services i.e. not on exempted services and non-taxable services aka in negative list. Further, the manner of calculation of Swachh Bharat Cess will be same as of service tax i.e. if abatement is there for any services under service tax act, than the same rule shall be applicable for calculating Swachh Bharat Cess. For example restaurants or eating joints having air-conditioning facility enjoys abatement of service tax of 60% i.e. service tax is levied only 5.60% (40% of 14%). Thus the same principle goes with Swachh Bharat Cess and the additional levy will be 0.20% (40% of 0.50%) which makes the effective service tax rate of 5.80%.
Similarly in case of reverse charge mechanism, the person liable to pay service tax is also liable to pay Swachh Bharat Cess and is case of Goods Transport Agency (GTA) which pays service tax at abated rate of 4.2% (30% of 14%), Swachh Bharat Cess will also be payable at abated rate of 0.15% (30% of 0.50%), making effective rate of service tax of 4.35%.
Thus, it is very clear that all the provisions of service tax as contained in Chapter V of the Finance Act, 1994 including those related to computation of taxable value, assessment, exemption, payment, penalty applicable to service tax would also apply in respect of Swachh Bharat Cess.
Swachh Bharat Cess in Invoice
Swachh Bharat Cess is an additional levy and is required to be added in the invoice separately. It should not be clubbed with service tax. However, one can take input credit of the Swachh Bharat Cess paid similar to service tax.
For example: Restaurant Bill assuming having air-conditioning facility.
|Bill of Food Items||1,000|
|Service Charge (usually 10%)||100|
|VAT @ 12.5% on Sub-Total||137.50|
|Service Tax (40% i.e. 5.60% on Sub-Total)||61.60|
|Swachh Bharat Cess (40% i.e. 0.20% on Sub-Total)||2.20|
|Total Bill Amount to be Paid||1301.30|
Incremental Taxes on your day-to-day expenditures
Applicability of Service Tax including Swachh Bharat Cess
In the following situations, Swachh Bharat Cess shall not be at all applicable for a service provider:
- In case where payment has been received and invoice is raised before the service becomes taxable, i.e., prior to 15th November, 2015.
- In case payment has been received before the service became taxable i.e. before 15th November, 2015 and invoice is raised within 14 days of imposition of new service tax including Swachh Bharat Cess, i.e. upto 29th November, 2015.
In any other cases, Swachh Bharat Cess shall be leveied along with Service Tax:
I don’t understand the contention of Government in imposing SBC. On the one hand Government is trying to pass GST bill which will eliminate all the indirect taxes including service tax, VAT, sales tax, excise duty and on the other hand Government has increased the rate of service tax from 12.36% to 14% as well as levied additional tax of 0.50% in form of Swachh Bharat Cess making things complicated for common man.
Do you support this additional levy of 0.50% Swachh Bharat Cess? Please share your views in the comment box below.