Swachh Bharat Cess

[dipsang vadhel]

The Chapter VI of Finance Bill, 2015 deals Swachh Bharat Cess (SBC). According to clause 119 of Finance Act, 2015:

“’There shall be levied and collected in accordance with the provisions of this Chapter, a cess to be called the Swachh Bharat Cess, as service tax on all or any of the taxable services at the rate of two per cent. on the value of such services for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto

The Swachh Bharat Cess (SBC) has been introduced with effect from 15^th November, 2015 on all the taxable services vide notification No.21/2015-Service Tax, dated 6th November, 2015. The CBEC has also issued Frequently Asked Questions (FAQ) to clarify the various aspects in relation to the applicability, valuation, levy and collection of SBC.

The brief Understanding on SBC is summarized as under:

1.SBC is levied as Service Tax:

As per section 119 of Finance Act, 2015 SBC is levied as Service Tax. Therefore, SBC is part and parcel of Service Tax. Further, The provisions of Chapter V of the Finance Act, 1994 and the rules made thereunder, including those relating to refunds and exemptions from tax, interest and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Swachh Bharat Cess on taxable services, as they apply in relation to the levy and collection of tax on such taxable services under Chapter V of the Finance Act, 1994 or the rules made thereunder, as the case may be.” All provisions including valuations, exemptions, POT, POP, Reverse charge etc. that applies to service Tax equally applies to SBC.

2. Non admissibility of CENVAT of SBC even when SBC is levied as Service Tax:

In terms of Rule 3 of CCR, Cenvat credit in respect of Service Tax levied under Section 66 of Finance Act is allowed. However, SBC is levied under section 119 of Finance Act, 2015. There is no amendment in Rule 3 of CCR so as to allow Cenvat credit of SBC levied as ST under section 119 of Finance Act, 2015. Therefore, CENVAT credit of SBC is not allowed.

3. Payment of SBC:

In terms of existing provisions of CCR, SBC is not integrated in the Cenvat Credit regime. Therefore, SBC cannot be paid by utilizing credit of any other duty or tax. It needs to be paid in cash only.

4. Point of Taxation of SBC:

Since SBC is levied under section 119 for the first time (though it is levied as Service Tax but it is not under Section 66 of Finance Act, thereby it becomes new levy. Accordingly, POT of new levy i.e. Rule 5 of Point of Taxation Rules is to be applied.