Eating out, telephoning and travel will become more expensive from today with the Government imposing 0.5 per cent Swachh Bharat cess on taxable services which is expected to yield about Rs 3,800 crore to the exchequer till the end of the fiscal year.
“The provisions of Swachh Bharat cess (SBC) @ 0.5 per cent under the Finance Act, 2015 are effective from November 15, 2015. Accordingly, service tax rate (for PAN) is increased from 14 per cent to 14.50 per cent,” an official notification read on Sunday.
With the imposition of the cess, service tax rate will go up from 14 per cent to 14.5 per cent on all taxable services.
According to Revenue Secretary Hasmukh Adhia, the Government expects to collect around Rs 10,000 crore from Swachh Barat cess for full year. So in the remaining months of this fiscal year till March 31, 2016, the cess would yield about Rs 3,800 crore to the kitty.
The Swachh Bharat cess would be levied only on the portion of taxable services (after abatement) and will go towards funding of the cleanliness drive, a pet project of Prime Minister Narendra Modi.
This means that service tax on restaurant bills will go up from 5.6 per cent to 5.8 per cent following the levy of 0.5 per cent Swachh Bharat cess.
And in rail travel “service tax of 14 per cent and Swachh Bharat cess of 0.5 per cent are chargeable on 30 per cent of total passenger fare equivalent to 4.35 per cent of the total fare on first class and all AC fares,” according to a circular issued on this regard.
The Finance Ministry has also clarified that the Swachh Bharat cess will not apply on those services for which payments have been received prior to November 15 and invoices raised before November 29.
“Service tax of 14 per cent and Swachh Bharat cess of 0.5 per cent are chargeable on 30 per cent of total passenger fare equivalent to 4.35 per cent of the total fare on first class and all AC fares,” a circular said.
The decision to impose 0.5 per cent cess will translate into a tax of 50 paise only on every Rs 100 worth of taxable services.
Explaining the provisions for the levy of cess, the Ministry said it would be calculated on the abated value or value arrived as per the Service Tax (Determination of Value) Rules, 2006.
For restaurants or eating joints having air conditioning facility, the cess would be 0.5 per cent of 40 per cent of the billed amount i.e 0.2 per cent. “The cumulative service tax and Swachh Bharat Cess liability would be 5.8 per cent (14.5 per cent of 40 per cent) of the total amount charged,” it said.
Finance Minister Arun Jaitley had in Budget 2015-16 proposed to levy a Swachh Bharat cess of up to 2 per cent “on all or certain services, if need arises”.
“Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives,” the Finance Ministry had said while notifying the Swachh Bharat cess.
Coming out against the Centre’s ‘Swachh Bharat’ cess, Communist Party of India (Marxist) today said the levy will pinch the pockets of the already “broken” common man and demanded that the government announce how much money was spent on Prime Minister Narendra Modi’s promotion of the initiative.
“We want the government to tell the country and Parliament how much money was spent on the Swachh Bharat Abhiyan advertisements featuring the Prime Minister. You spend that much money on the campaign and then collect money from people
to finance that campaign.
“At that time it was announced that it will be part of corporate social responsibility (CSR), which has now turned
out to be the people’s burden,” CPI(M) general secretary Sitaram Yechury told reporters here.
The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax. The Rs 3,800 crore collection from the cess would be over and above that.
(With Inputs from Agencies)