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Service Tax rate

Service Tax rate
Service Tax rate @ 15%, KrishiKalyan Cess of 0.5% applicable on all taxable services from 01.06.2016

The Govt. had announced applicability of new KrishiKalyan Cess (KKC) in Budget 2016.TheKrishiKalyan Cess is applicable w.e.f01.06.2016.

On or after 01.06.2016, KrishiKalyan cess (KKC) of 0.5 % will be applicable on all taxable services.

This will increase the effective rate of service tax to 15%. The new break-up for payments of service tax will be

14%- Service Tax

0.5%-Swachh Bharat Cess

0.5%-KrishiKalyan Cess

Other Important points in respect of KrishiKalyan Cess are:
  1. The accounting codes for payment of KrishiKalyan Cess will be:
    00441509- Tax payment
    00441510-Interest on KrishiKalyan Cess
    00441512- Penalties
  2. KKC is also applicable on services taxed under the reverse charge mechanism.
  3. KKC @ 0.5% will be levied on value of all taxable services after availing abatement.
  4. KKC would be levied at 0.5% on the total value of services. Calculation of KKC will be made in a manner same as that of Swachh Bharat Cess.
  5. Cenvat credit of KKC available to service providers only:
    • A provider of output service shall be allowed to take cenvat credit of KKC on eligible input services.
    • Cenvat credit of KKC shall be utilised only towards payment of KKC.
    • Cenvat credit of Service Tax or excise duty cannot be utilized for payment of KKC and also cenvat credit of KKC cannot be utilised for payment of service tax and excise duty.
  6. Provision of KKC in case of on-going services
    • For bills made before 01.06.2016 but paid on or after 01.06.2016, KKC will be applicable and will have to be paid irrespective of whether it is charged in the invoice or not i.e KKC will be applicable for all services that may have been provided before 01.06.2016, but payment has been made on or after 01.06.2016.
    • For bills that are generated and paid before 01.06.2016, KKC will not be applicable.
    • However, where service has been provided before 01.06.2016 and payment is made before 01.06.2016, then invoice has to be generated within 14 days (by 14.06.2016). If invoice is not generated within 14 days of payment, KKC will be applicable.
Few examples for applicability of KKC are as follows:
# Time of issuance of invoice and amount of Invoice Time of receipt of payment and amount of payment received Position of Taxability
1 25.5.2016 for Rs 5,00,000 26.5.2016 for Rs 5,00,000 Non Taxable as issue of invoice and receipt of payment before 1stJune 2016.
2 28.5.2016 for Rs 5,00,000 29.5.2016 for Rs 4,00,000 Non Taxable to the extent of 4,00,000 because only part payment has been received for the same before the date of taxability of KKC. The Balance Rs. 1 Lac, if paid after 31.5.16 will be subject to KKC
3 4.6.2016 for Rs 5,00,000 29.5.2016 for Rs 5,00,000 KKC will not be applicable as receipt of payment before 1stJune 2016 while invoice issued within 14 days from taxability of service.
4 20.6.2016 for Rs 2,50,000 24.5.2016 for Rs 2,50,000 KKC will be applicable as essential requirement of issue of invoice within 14 days from taxability of service is not met.
5 Total consideration was 6 Lacs. On 28.5.2016 invoice was issued for Rs 2,50,000 and remaining invoice on 19.6.2016 29.5.2016 for Rs 6,00,000 KKC will not be applicable to the extent of 2,50,000 and applicable on Rs. 3,50,000/-  because part invoice was issued after 14 days from the date of taxability.

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