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Swacch Bharat Cess – Service Tax wef 15 November 2015

Swacch Bharat Cess of 0.5% wef 15th November 2015

The Swacch Bharat Cess was announced in the Budget 2015. However it was not made effective / applicable at that time.

The Budget 2015 (Finance Act, 2015) provided for the levy and collection of the Swacch Bharat Cess at a rate not exceeding 2%. The government has now notified that the Swacch Bharat Cess will be levied at a rate of 0.5% and will be effective from 15 November 2015.

Notification No. 21/2015 has been issued notifying 15th November 2015 as the date from which the Swacch Bharat Cess would be applicable.

Notification No. 22/2015 has been issued which specifies that an exemption has been granted in excess of the Swacch Bharat Cess calculated at 0.5% of the value of taxable services. Effectively, the rate of cess will be 0.5%.

Thus, the Rate of Service Tax increases to 14.5% with effect from 15th November 2015.

Below are some additional points to help you understand the implications better:

  • For services covered by abatement, for example, Goods and Transport Agency (GTA) service where at present the tax is payable at 4.2% (30% of 14%), the new rate of service tax will be 4.35% (30% of 14.5%, and not 4.2%+0.5% = 4.70%). Similarly, for other services covered by abatement, the effective service tax rate will be 14.5% x effective abatement rate under the latest notification/s.
  • In case of works contract, Service Tax is to be applied on the value at the rate of 14.5%. Thus, the effective rate of tax in case of original works will be 5.8% (14.5% * 40%) and in case of other than original works it will be 10.15% (14.5%*70%). Similar, would be for restaurant and outdoor catering services.
  • Swacch Bharat Cess has to be collected and paid separately from service tax and is not subsumed in existing service tax rate. The Swacch Bharat Cess should be be charged separately on the invoice, accounted separately in the books of account and paid separately under separate accounting code (which is soon expected to be notified).
  • If the services provided are covered by mega exemption notification i.e. 25/2012-ST. one does not need to charge only the Swacch Bharat Cess. Similar the Swacch Bharat Cess will not be applicable to the services covered by the negative list.
  • If the service have been provided prior to 15th November 2015 but invoiced on / after 15th November, and no advance has been received, we believe that teh Swacch Bharat Cess should be levied as required under the Point of Taxation Rules.
  • In case of reverse charge services where services have been received prior to 15th November 2015 but the consideration paid post after 15th November 2015, teh Swacch Bharat Cess will have to be paid.
  • We believe that since there has been no amendment to the Cenvat Credit Rules, 2004 regarding availment and utilisation of the Swacch Bharat Cess, credit of this cess is unlikely to be admissible. However, we also do believe that a suitable amendment would be made to the Cenvat Credit Rules, 2004 in due course.
  • Do remember that the Swacch Bharat Cess applicable only to services (and thus Service Tax). It does not apply to excise or customs duties. Thus, manufacturing entities should not charge any extra cess.

No TDS on Service Tax Component

Clarification in the Latest Circular from CBDT

The latest circular from CBDT (Central Board of Direct Taxes) clarifies, based on a High Court decision, that service need not be deducted on the Service Tax component.

Thus, your cllients should now pay you higher to that extent. Correspondlngly, you need to deduct lower TDS to a similar extent.

An example:

  Earlier NOW
Head % Rs Rs
Amount Billed 10,000 10,000
Service Tax 12.36% 1,236 1,236
Gross Amount 11,236 11,236
T.D.S. 10.00% 1,124 1,000
Net Amount Receivable / Pauable 10,112 10,236

Ensure you follow this and also make sure your clients pay you accordingly. The link to the circular is here.

Note that, for now, this is applicable only if Service Tax is charged seprately for professional / techincal services.

Service Tax VCES Forms

Service Tax Voluntary Compliance Scheme – Forms Notified

The Service Tax authorities have notified the forms and details for the Service Tax Voluntary Compliance Encouragement Scheme.

The key details to be provided are, other than Name, Address, ST No., etc. are:

  • Amount of Service Tax unpaid as on 31st December 2012
  1. Higher Education Cess
  2. Education Cess
  3. Service Tax
  • The above calculation is to be done using the same method as used for the relevant period service tax returns.

Do have these details ready to ensure we can start filing at the earliest. The relevant forms in soft copy will be sent later.

ST Due Date for H2FY13 extended

ST Due Date for Oct-12 to Mar-13 extended

The due date for filing the service tax returns for the second half of Financial Year 2013 (October 2012 to March 2013) has been extended to 31st August 2013. The form required to be filed for this return will be available around 31st July 2013, as per the latest ST Notification.

The said notification is available here: http://www.servicetax.gov.in/notifications/notfns-2013/stodr-03-2013.htm

Do revert to me if you need any further clarifications.

ST Return Due Date Postponed

Service Tax Return Due Jul-12 to Sept-12 extended to 30th April 2013

Service Tax Return (ST 3) for the period 1st July – 30th September, 2012 is now available in a modified format for e-filing in ACES.CBEC has extended the last date of e-filing of the new Service Tax Return (ST-3) for the period July-September 2012, from 15th April to 30th April 2013.