Today we will discuss about Krishi Kalyan Cess. Budget 2016-17 proposed to impose a Cess, called the Krishi Kalyan Cess, of 0.5% on all taxable services. The new effective Service Tax hence increased to 15% from 14.5%. So it is not a scheme, it is just a new kind of tax that Finance Minister has introduced.
What is this?
The term “Cess” means “tax” levied by the government to raise funds for a specific purpose. So now we can guess it is something about “Farmer’s Kalyan/welfare”. This cess would be used for financing initiatives relating to improvement of agriculture and welfare of farmers. It also proposed cut in excise duty on irrigation pumps and soil nutrients besides slashing import duty on cold storage related equipments.
Means the tax I will give to the Government, it will keep 0.5% of my 15% service tax for Indian farmers’ welfare.
Why Krishi Kalyan Cess was in news?
We have already mentioned at the top that Union Finance Minister Arun Jaitley had presented the Union Budget 2016-17 on 29 February 2016. The Service Tax increased to 15% after imposition of Krishi Kalyan Cess of 0.5% as announced in the Budget.
How it will be calculated?
Example of Krishi Kalyan Cess calculation –
For a service worth Rs. 100, Service Tax will be Rs. 14 at 14% rate and Swachh Bharat Cess (SBC) will be Rs. 0.05 at 0.5%. Similarly, Krishi Kalyan Cess will be Rs. 0.05 at 0.5%.
So the total chargeable amount will be Rs. 115.
When this Cess will come into force?
Krishi Kalyan Cess will come into force with effect from 1st June, 2016.
What is the budget target for Krishi Kalyan Cess?
Rs. 5000 crore
Some more points about Krishi Kalyan Cess
Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. The nature of KKC is that of a Service Tax. Rate of KKC is fixed @ 0.50 percent of value of service. KKC shall be levied on services only which could be on all services or some of the services (as the provision provides for ‘….on any on any or all the taxable services…..’). ‘Krishi Kalyan Cess’ though said to be Cenvatable, but appropriate amendments also required in the Cenvat Credit Rules, 2004. KKC shall be chargeable on invoices separately as KKC like Swachh Bharat Cess. Charging Service Tax @ 15 percent (14% Service Tax, 0.50% SBC and 0.50% KKC) is not legally correct.
So today we knew details about Krishi kalyan cess effective date, its meaning of course, notification/applicable date, how it is calculated (Calculation method) with a simple example, accounting code, its purpose, in which Indian budget it was introduced, input credit, is it CENTVAT(able)?
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