Krishi Kalyan Cess: Accounting Code for KKC Payment, Cenvat Credit Rules, etc.

Krishi Kalyan Cess (KKC) @0.5% on Taxable Services w.e.f. 1 Jun. 2016

In line with Budget 2016 proposals, Krishi Kalyan Cess (KKC) has been levied @0.5% of the value of all taxable services w.e.f. 1 Jun. 2016. KKC, for the purpose of ‘financing and promoting initiatives to improve agriculture’. It may be noted that the KKC is to be levied over and the above the Service Tax and the Swachh Bharat Cess.

CBEC has notified “Accounting code for payment of Krishi Kalyan Cess (KKC)” by the assessees. Also it has issued Notifications on issues relating to KKC, like CENVAT Credit, etc.

A. Accounting Codes for payment of Krishi Kalyan Cess (KKC) notified by CBEC

The CBEC vide Circular No. 194/04/2016-ST dt. 26 May 2016 has notified “Accounting codes for payment of Krishi Kalyan Cess (KKC)” by the assessees, as under:

Chapter VI of the Finance Act, 2015 is effective from 1st June, 2016, i.e. KKC is leviable on all taxable services, other than services which are fully exempt from Service Tax or services which are otherwise not liable to Service Tax under section 66B of the Finance Act, 1994, at the rate of 0.5%. Accordingly, accounting codes have also been allotted by the Office of the Controller General of Accounts for the new Minor Head “507-Krishi Kalyan Cess” and new Sub-heads, for payment of KKC, as under:

Items Accounting Codes/ Sub Head
Krishi Kalyan Cess (Minor Head) 0044-00-507
Tax Collection 00441509
Other Receipts (Interest) 00441510
Deduct Refunds 00441511
Penalties 00441512

 CBEC Circular No. 194/04/2016-ST dt. 26 May 2016

B. Cenvat Credit Rules for Krishi Kalyana Cess (KKC) notified by CBEC

The CBEC vide Notification No. 28/2016 – Central Excise (N.T.) dt 26 May 2016 has notified CENVAT Credit (Seventh Amendment) Rules, 2016 regarding KKC, on the following lines:

A provider of output service shall be allowed to take CENVAT credit of the KKC on taxable services, i.e. the Cenvat credit of any other duty/cess/tax shall not be utilised for payment of KKC. Further, the Cenvat credit in respect of KKC on taxable services shall be utilised only towards payment of KKC on taxable services. For details, refer the CBEC Notification, as attached here-under:

 CBEC Notification No. 28/2016 – Central Excise (N.T.) dt 26 May 2016

C. Other Notifications of CBEC on issues relating to Krishi Kalyan Cess (KKC)

In addition to above notifications the CBEC has issued following notifications/ clarifications about the provisions relating to KKC under Service Tax:

a) Provisions of the Service Tax Reverse Charge mechanism shall be as it is applicable for KKC;

 CBEC Notification No. 27/2016-ST dt. 26 May 2016

b) No KKC on exempt services. However, for the services taxable subject to abatement, the KKC shall apply only on specified percentage of taxable value as determined in accordance with the Service Tax (Determination of Value) Rules, 2006.

 CBEC Notification No. 28/2016-ST dt. 26 May 2016

d) Rebate benefits of KKC made available to exporters;

 CBEC Notification No. 29/2016-ST dt. 26 May 2016

e) SEZ units & developers can avail KKC refund;

 CBEC Notification No. 30/2016-ST dt. 26 May 2016

f) Service providers who has opted to pay service tax under Rule 6 of Service Tax Rules, 1994 shall have the option to pay KKC calculated under Rules 6(7E) as under:

‘Service Tax liability calculated as per Rule 6’ multiplied by ‘effective rate of KKC’ and dividing the product by the ‘service tax rate specified in section 66B’ for any calendar month/quarter as may be applicable. It may be noted that once the option under this sub-rule is exercised, it shall apply uniformly in respect of such services and shall not be changed during a financial year under any circumstances.

 CBEC Notification No. 31/2016-ST dt 26 May 2016

g) CBEC exempts taxable services from the whole of Krishi Kalyan Cess leviable thereon with respect to which the invoice for the service has been issued on or before 31st May, 2016 subject to the condition that the provision of the service has been completed on or before 31st May, 2016.

 CBEC Notification No. 35/2016-ST dt 23 June 2016

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