KKC Not Payable on transactions prior to 01/06/2016

[Monarch Bhatt]

The Notification Number 35/2016- Serviced Tax dated 23^rd Day of June 2016, clarifies that Krishi Kalyan Cess (KKC) will not be leviable in a cases where –

(i)        The invoice for the service has been issued on or before 31/05/2016 AND

(ii)       Service has been rendered on or before 31/05/2016.

The above exemption clarification has been issued by way of notification which also supports my view expressed by me immediately in my post budget article published on taxindiaonline.com on 02/03/2016. In that article titled “Explanation 2 to rule 5 of POT is Ultra vires” I had discussed and objected on the applicability of KKC by merely amending rule 5 of Point of Taxation Rules, 2011 and I mentioned that it is to be treated as ultra vires provision as it imposes KKC on the transaction wherein, services has been rendered prior to 01/06/2016. Now after imposition of KKC, board has realized that it is against the settled principal of service tax and hence this exemption has been introduced by way of exemption notification.

The exemption notification to some extent is granting relief to the service provider as due to this KKC will not be leviable on the pending payments. This is much awaited clarification, but I will say the attempt is still halfhearted attempt by the board because as per the current provision KKC is still payable in the following circumstances in the absence of clarification.

(i)   The advances received prior to 01/06/2016 and invoice not issued within 14 days i.e. by 14/06/16. In such cases clarification shall be provided that KKC is not payable as the POT is the receipt of advances.

(ii)   Invoice issued prior to 01/06/2016 and Amount received after 01/06/2016. KKC is not payable as the POT is the issue of invoice.

I hope that by the end of this month this will also be clarified.

As per the recent provision and notification the applicability of KKC has been analysed below.

Sr. No.	Description of service	Applicability of KKC
FOR PROVIDER OF SERVICE
1	Advances received prior to 01/06/2016 Invoice issued prior to 01/06/2016	KKC is not payable.
2	Advances received prior to 01/06/2016 Invoice issued within 14 days i.e. by 14/06/16	KKC is not payable.
3	Advances received prior to 01/06/2016 invoice NOT issued within 14 days i.e. by 14/06/16	KKC is not payable as the POT is the receipt of advances. However, since credit of KKC is eligible assessee may pay the liability by raising supplementary invoice for recovery of KKC to avoid the disputes with department.
4	Invoice issued prior to 01/06/2016 Amount received prior to 01/06/2016	KKC is not payable.
5	Invoice issued prior to 01/06/2016 Amount received after 01/06/2016	KKC is not payable as the POT is the issue of invoice. However, since credit of KKC is eligible assesse may pay the liability by raising supplementary invoice for recovery of KKCto avoid the disputes with department.
6	Invoice issued prior  to 01/06/2016 And Provision of service has been completed prior to 01/06/2016	KKC will not be payable as clarified by Notification No. 35/2016-Service Tax dated 23/06/2016.
FOR RECEIVER OF SERVICE where service tax is payable by receiver of service under reverse charge mechanism such as Manpower Supply Service, Legal Service, security service, works contract service, import of services, etc.
7	Invoice is dated prior to 01/06/2016 payment made on or before 31/05/2016 and within 3 months from the invoice date	KKC is not payable.
8	Invoice is dated prior to 29/02/2016 payment not made on or before 31/05/2016	KKC is not payable as POT will be immediately next day after three months from the invoice date which will be prior to the introduction of KKC.
9	Invoice is dated prior to 01/06/2016 payment not made on or before 31/05/2016 but paid within 3 months from the invoice date after 01/06/2016	KKC is payable.
10	Invoice dated prior to 01/06/2016 and payment not made upto 01/06/2016 but debited in the books of accounts prior to 01/06/2016 where service tax is payable as receiver of service for transaction with associated enterprises.	KKC is not chargeable as POT is debit in the books of accounts or payment whichever is earlier and debit in the books of accounts is prior to the levy of KKC.
11	Invoice issued prior  to 01/06/2016 And Provision of service has been completed prior to 01/06/2016	KKC will not be payable as clarified by Notification No. 35/2016-Service Tax dated 23/06/2016.

Discussions to this article

[abhi panic]

Exemption and not clarification

I find that these days every other article writer coolly makes a damaging statement that so and so provision is ultra vires.

Do they ever realize that holding a provision "ultra vires" is the prerogative of the Courts and even Tribunals are barred from examining the vires of a particular rule or provision.

Merely by saying so, a provision cannot become ultra vires and mind you the Central government is wise enough to come out with a retrospective legislation or an Amendment law for at the end of the day - to err is human - and taxes cannot be merely avoided on this ground. It would be better if the learned authors assist the government in a proactive manner rather than claiming that they are responsible for an amendment in the law. The "I told you so" attitude should be confined to their inner self rather than on a platform where young try to find answers to their queries. Can an assessee argue with the officers from the department that the provision is ultra vires and he cares two hoots for the same?

So also, making a mention that the recent notification 35/2016-ST is an exemption clarification is grossly inappropriate.

The notification is an exemption notification - nothing more and nothing less. By saying clarification, does the author intend to say that it has a retrospective effect, if at all it applies in any fashion?

I request article writers to deliberate on a law rather than castigating what has been prepared by learned men in the Board. For a change that is.

regards

abhishek panicker

 

[Monarch Bhatt]

I appreciate your concerns. However with due respect, I have not find any reason in your long discussion that why it should not be considered as ultra vires? In my write up I had given all the reasoning to treat it as ultra vires. Therefore, on technical aspect there is nothing to reply.

On the aspect of assisting the government, it was written immediately by me on the budget blog itself, we had already asked the board for such notification well in advance. Even given an opportunity, I am ready to suggest many more for upcoming new levy of GST.

Thanking you.