The Union Budget, 2015-16, proposed a provision for levying a Swachh Bharat Cess on all or any of the services, for the purposes of financing and promoting Swachh Bharat initiatives or for any other purpose relating thereto. The rate proposed was up to 2 percent on all or certain services, if need arises. Now the levy of Swachh Bharat Cess has been finalized at 0.5 percent on all taxable services to fund the Swachh Bharat Abhiyan. This will make the Service Tax rate to be 14.5 percent effective from 15/11/2015, which is just after the festive period of Diwali.
An explanation by the Finance Ministry is put forward as Swachh Bharat Cess not to be another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. They also add that the proceeds from this Cess will be exclusively used for Swachh Bharat initiatives. It seems that consumer will pay 50 paisa more on every one hundred rupees of taxable services. But as we know every freeaccutaneonline drop counts in making the mighty ocean. This 0.5% will result into expected revenue of 3000 crores for the Government. Cleanliness is one of the major initiative by the Government to ensure higher hygiene standards across the country.
We are a country of more than 120 crore people. For such a vast and populous country we do have our fair share of cleanliness concerns. In fact, persons entrusted with the job of keeping our country clean, struggle constantly. Cleanliness also has huge impact on public health. Dirty surroundings also cause many diseases, like, malaria, dengue, diarrhea, jaundice, cholera etc., with associated high public health expenditure. Increased allocation and proper usage of funds for Swachh Bharat Abhiyan can prevent many of these diseases with consequential benefit to one and all.
Though the initiative is a welcome one it has few frailties which needs to be taken care of. The levy has been targeted on all the taxable services, which makes the service industry more expensive. It has been levied 15.11.20115 which is rather an abrupt imposition as it is middle of the month. This sudden imposition will result in complications in business operations from change of rate from mid of the month like point of taxation, value of invoicing, tax payment under reverse charge, value of abatement etc. There is no amendment in the Cenvat Credit Rules, 2004 regarding utilization of Swachh Bharat Cess so far. In the absence of the same, credit would not be admissible. This is a deterrent maneuver when we are moving toward GST regime where there would no cascading effect of taxes and full credit would be allowed. One can hope that suitable amendment is brought in Cenvat Credit Rules, 2004 to provide for availment and utilisation of SBC.
written by
Ruhi Jhota
Miss Ruhi is a lawyer and practicing in Indirect Taxes in Ahmedabad, She also possess strong research background which is required to present the complexity of taxation in terms that a layman can understand.
