0.5% Swachh Bharat Cess further increases Service Tax Rate

Swachh Bharat Cess @0.5% on Value of Taxable Services w.e.f. 15 Nov. 2015: CBEC

Budget 2015 had introduced Swachh Bharat Cess of upto 2% from the date to be notified by the GoI. Accordingly, the GoI has notified 15th November 2015 as the Appointed Date for applicability of Swachh Bharat Cess vide Service Tax Notification No. 21/2015 dt. 6th November 2015. Further, GoI, vide Service Tax Notification No. 22/2015 dt 6th November 2015 has exempted Swachh Bharat Cess in excess of 0.5%, thereby restricting the rate of Swachh Bharat Cess to 0.5% only.

Effectively the Service Tax Rate has become 14.5% w.e.f. 15th November 2015, in line with the service tax notifications in respect of Swachh Bharat Cess issued by the CBEC, however it’s not yet clear whether Tax Credit for Swachh Bharat Cess will be allowed under Cenvat Credit Rules as the requisite modifications thereto are still awaited.

It may be noted that the Swachh Bharat Cess is a straight addition to the rate of Service Tax and is to be applied on total amount of taxable services, unlike Education Cess or S&H Education Cess which were applied only on Service Tax Rate.

Service Tax Notification No. 21/2015 dt. 6 Nov. 2015

In exercise of the powers conferred by sub-section (1) of section 119 of the Finance Act, 2015 (20 of 2015), the Central Government hereby appoints the 15th  day of November, 2015 as the date with effect from which the provisions of Chapter VI of the said Act, shall come into force.

Service Tax Notification No. 22/2015 dt. 6th Nov. 2015

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.

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