FAQs on SWACHH BHARAT CESS (SBC)
Q.1 What is Swachh Bharat Cess (SBC)?
Ans. It is a Cess which shall be levied and collected in accordance with the provisions of Chapter VI of
the Finance Act, 2015,called
Swachh Bharat Cess,
as service tax on
all the
taxable services at the rate of 0.5% of the
value of taxable
service.
Q.2 What is the date of implementation of SBC?
Ans. The Central Government has appointed 15th day of November, 2015 as the date from which provisions of
Swachh Bharat Cess will come into effect (notification No.21/2015-Service Tax,
dated 6th November, 2015 refers).
Q.3 Whether
SBC
would be leviable on exempted services and services in the negative list?
Ans. Swachh Bharat Cess is not leviable on services which are fully exempt from service tax or those covered under
the negative list
of services.
Q.4 Why
has SBC been imposed?
Ans. SBC has been imposed for the purposes of financing and promoting
Swachh Bharat initiatives or for any other
purpose relating
thereto.
Q. 5 Where will
the money collected under SBC go?
Ans. Proceeds of the SBC will be credited to the Consolidated Fund of India, and the Central
Government may, after due appropriation made by Parliament, utilise such sums of money of the
SBC for the purposes of financing and promoting Swachh Bharat initiatives or for any other
purpose relating thereto.
Q.6 How will the SBC
be calculated?
Ans. SBC would
be calculated in the same way as Service tax is calculated. Therefore, SBC
would be
levied on the same taxable
value as service tax.
Q.
7 Whether SBC would be required to
be
mentioned separately in invoice?
Ans. SBC would be levied,
charged, collected and paid to Government independent of
service tax. This needs to be charged separately
on the invoice, accounted
for separately
in the books of account
and paid separately under separate accounting code which would be notified shortly.
SBC may
be charged separately
after service tax as a different line item in invoice. It can be accounted and
treated
similarly to Education
cesses.
Q.
8 Whether separate accounting code will be there for Swachh Bharat Cess?
Ans. Yes, for payment of Swachh Bharat Cess, a separate accounting code would be notified
shortly in consultation with the Principal Chief Controller of Accounts. These are as follows:-
Swachh Bharat Cess
(Minor Head)
|
Tax
Collection
|
Other Receipts
|
Penalties
|
Deduct
Refunds
|
0044-00-506
|
00441493
|
00441494
|
00441496
|
00441495
|
Q.
9 What would be effective rate of service tax
and
SBC post introduction
of SBC?
Ans. Effective rate of service tax plus SBC,
post introduction of SBC,
would be [14% + 0.5%].
Q.10 Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on
the amount of service tax like we were earlier doing for calculating Education Cess and
SHE Cess?
Ans. No, SBC is not a cess on Service Tax. SBC shall
be levied @ 0.5% on
the value of taxable
services.
Q.
11 Whether SBC is levied
on all or selected services?
Ans. The Central Government was empowered to impose SBC either on all or some of the taxable services. Vide notification No 22/2015-ST dated 6-11-2015, Government has notified
that SBC shall be applicable on all taxable services except services which are either fully
exempt from service tax under any notification issued under section 93(1) of the Finance Act, 1994 or
are
otherwise not leviable to
service tax under
section 66B of
the Finance Act, 1994.
Q.12 How will the SBC be calculated for services under reverse charge mechanism?
Ans. In case of reverse charge under section 68(2) of the Finance Act, 1994, the liability has been shifted
from service provider to the service recipient. As per section 119 (5)
of the Finance
Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made
thereunder are applicable to SBC also. Thus, the reverse charge under section 68(2) of the Finance Act,
1994, is made
applicable to SBC. In this context, to clarify, Government has issued notification No.
24/2015-Service Tax dated 12th November, 2015 to provide that
reverse
charge
under notification No.30/2012-Service Tax dated
20th June, 2012 shall be applicable
for the purpose of levy of
Swachh Bharat Cess mutatis
mutandis.
Q.13 How will SBC be calculated for services
where abatement
is allowed?
Ans. Taxable services, on which service tax is leviable on a certain percentage of value of
taxable
service, will attract SBC on the same percentage of value as provided in the
notification No. 26/2012-Service Tax, dated 20th June, 2012. So, this notification would apply for SBC also in the same manner as it applies for service tax.
For example, in the case of GTA, [Service Tax + SBC]% would be (14% Service Tax +
0.5% SBC) X 30% = 4.35% (4.20%+0.15%)
Q.14 Whether Cenvat
Credit of the SBC is available?
Ans. SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be
availed.
Further, SBC cannot
be paid by utilizing
credit of any other
duty
or tax.
Q.15 What would be the point of taxation for Swachh Bharat Cess?
Ans. As regards Point of Taxation, since this
levy
has come for the first time, all services (except
those services which are in the Negative List or are wholly
exempt from service tax) are being subjected to SBC for the first time. SBC, therefore, is a new levy, which was not in existence
earlier. Hence, rule 5 of the Point of
Taxation Rules would be applicable
in
this case. Therefore, in cases where payment has been received and invoice
is raised before the service becomes taxable, i.e. prior to 15th November, 2015,
there is no lability of Swachh Bharat Cess. In cases
where payment has been received before the service became taxable and invoice is raised within
14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise. Swachh
Bharat Cess will be payable
on
services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that
date. Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov,
2015 but payment is received prior to that date and invoice in respect of such service is not
issued
by
29th Nov, 2015.
Q.16 How would the tax (Service Tax and SBC) be calculated on services covered under
Rule 2A,
2B or 2C of Service
Tax (Determination of Value) Rules, 2006.?
Ans. The tax (Service Tax and SBC) on services covered by Rule
2A, 2B or 2C of Service Tax
(Determination of Value) Rules, 2006, would be computed by multiplying the value determined in accordance with these respective rules with [14%
+ 0.5%]. Therefore, effective rate of Service Tax plus SBC in case of original works and other than original works under the works contract
service would be 5.8% [(14% + 0.5%)*40%] and 10.15% [(14% + 0.5%)*70%]
respectively. Similar, would
be the tax treatment for restaurant and outdoor catering services.
Q.17 How would the tax be calculated on restaurant services covered under Service Tax
(Determination of Value)
Rules,
2006.?
Ans. Swachh Bharat Cess would be
calculated on the value
arrived
at
in accordance with
the Service Tax (Determination of Value)
Rules, 2006. For example, the effective Swachh Bharat
Cess in respect of services provided in relation to serving of food or beverages by
a restaurant,
eating joint or a mess, having the facility of air–conditioning or central air-heating in any
part
of the establishment, would be
0.5% of 40% of the total amount, i.e, 0.2% of the total amount. The
cumulative service tax and Swachh Bharat Cess liability would be [14% ST + 0.5% SBC] of
40% of the total amount, i.e., 5.8%
of the total
amount charged.
Q.18 Whether SBC would be applicable on services covered by Rule 6 of Service Tax
Rules
(i.e. air travel agent, life insurance premium, purchase and sale of foreign currency and services by
lottery distributors/selling agents)
Ans. Sub-rule (7D) to rule 6 has been inserted vide notification 25/2015-Service Tax, dated
12th November, 2015 so as to provide that the person liable for paying the service tax under sub-
rule (7), (7A), (7B) or (7C) of rule 6 of Service Tax Rules, shall have the option to pay
SBC as
determined as
per
the following formula:-
Service Tax liability [calculated
as per sub-rule (7),
(7A), (7B) or (7C)]
X 0.5%/14%
The option under this sub-rule once exercised, shall apply uniformly
in respect of such services and
shall not be changed during a financial year
under
any circumstances.
Q. 19 How would liability be determined in case of reverse charge services where services
have
been received prior to
15.11.2015 but consideration paid post
15.11.2015?
Ans. In respect of reverse charge mechanism, SBC liability is determined in accordance with Rule 7 of Point of Taxation Rules, as per
which, point of
taxation is the
date on which consideration is paid to the service provider. Thus, SBC liability in such case will be 0.5% X
Value of taxable service.
Q.20 Does a person providing both exempted and taxable service and reversing credit @
7% of value of exempted service
under Rule 6 of Cenvat Credit Rules, does he need to reverse the SBC
also?
Ans. As SBC is not integrated in the Cenvat Credit chain and reversal under
Rule 6 is payment
of amount equal to 7% of the value of exempted services, hence, reversal of SBC is not required
under Rule 6 of Cenvat Credit Rules,
2004.
FAQs on SWACHH BHARAT CESS (SBC)