USE OF SWACHH BHARAT CESS (SBC)

[Dr. Sanjiv Agarwal]

According to the statutory provisions for levy of Swachh Bharat Cess (SBC), Chapter VI (Section 119) of the Finance Act 2015 contains provisions for levy and collection of Swachh Bharat Cess (SBC). Now the Government has announced 15th November, 2015 as the date from which the provisions of Section 119 would come into effect (notification No.21/2015-Service Tax, dated 6th November, 2015 refers). Simultaneously, Government has also notified levy of Swachh Bharat Cess at the rate of 0.5% on all taxable services. Effectively, the rate of SBC would be 0.5% and new rate of service tax plus SBC would be 14.5%. As such SBC translates into a tax of 50 paisa only on every one hundred rupees worth of taxable services. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives. (Refer Notification No. 21/2015-ST and 22/2015-ST, both dated 6.11.2015).

The Service Tax collection target for the current fiscal is ₹ 2,09,774 crore @ 14% w.e.f. 1^st June 2015 and @ 12 percent prior to that date. With about 135 days available to collect Swachh Bharat Cess, it is expected that Government may collect about ₹ 600-700 crore on account of SBC in the time available.

Use of SBC

SBC seeks to collect about ₹ 300 crore in the residual 2015-16 which has to be deployed towards Swachh Bharat Mission (SBM) initiatives through various means. While the allocation of the funds so collected which go to the consolidated fund of India, ought to be judicious without discriminating among the states / UTs, it is equally important that its end use is also effectively monitored to ensure its fullest and desirable utilization. The distribution and monitoring holds the key for its proper usage. It is suggested that a separate cell in Ministry should monitor the fund deployment and it should also be subject to performance / efficiency audit to ensure optimum use of public money.

According to one report, in the current fiscal, 13 out of 29 states have not even spent 50 percent of their funds on the Swachh Bharat Mission (Rural), Government's programme on sanitation in rural areas. Also, data from Ministry of Drinking Water and Sanitation (MDWS) reveal that states have ₹ 2000 crores of unspent money. However, there are few states who have over spent also.

While toilets building alone would not lead to Swachh Bharat, focus is also needed in areas like education, creating awareness, solid waste management and public health measures. Government should ensure the SBC spends in focus areas, some of which could be as follows–

• Hygienic sanitation environment
• Sufficient public toilets / convenience facilities
• Adequate water availability centers
• Efficient garbage collection
• Waste management and disposal
• Creating awareness amongst citizens, especially in rural areas by way of education, focused programmes etc.

Government is also planning to introduce a 'clean city contest' to boost Swachh Bharat mission under which cities will be ranked on the parameters of sanitation, cleanliness and hygiene. Swachh Bharat Mission (SBM) is an attempt to keep Government's promise of delivering a clean India by 2019. The ranking is expected to be based on a scientific assessment of the level of cleanliness, besides helping the authorities to mentor and guide those lagging behind. It may be the starting point for 'Smart Cities Project' (SLP).

However, as a word of caution, it would be worth mentioning here that SBC should not be used for financing the smart city project of the Government as SBM and SLP are two entirely different projects having diverse objectives, though SBM implementation will give a boost to SLP.

In fact, Government should under specific project bring municipal corporations, railways, panchayats, CSR initiatives and SBC together to have an effective impact on the SBP and its outcome.

To sum-up

It appears that Government was waiting for Bihar elections to conclude so that this levy could be pressed into for collection of SBC. In fact, Government has lost revenue collection in the form of SBC as had it been collected from 1^st June 2015, it could have collected over ₹ 700 crore by now in last over five months.

Now that Swachh Bharat Cess (SBC) has been levied at an effective rate of 0.50 percent of value of taxable services w.e.f. 15 November, 2015, we have no option but to accept this SBC as a fact of life. There appears to be no chance of its roll back or withdrawal in the present scenario. The only silver lining is that once Goods and Service Tax (GST) comes, this cess will vanish. So, we have one more reason to hope for an early GST in the country. However, if GST is delayed, SBC may continue and there may be likelihood of enhancement of effective rate from 0.50 percent to 1 percent or even more. The use of SBC should also be subject to performance audit.