TIOL-DDT 2724
13 11 2015
Friday

DDT is happy to report that the Government has reacted to public outcry and issued clarifications on the huge confusion created by Swachh Bharat Cess. TIOL has repeatedly highlighted the issues of concern to the assessees.

Tax on whole value or abated?

An effective rate of 0.5 percent of the value of taxable services was fixed by Notification No.22/2015, dated 06.11.2015. Now this notification is amended to clarify that:

1. Swachh Bharat Cess shall be leviable only on that percentage of taxable value specified in the notification No. 26/2012-Service Tax, dated 20th June, 2012. (Abatement Notification)

2. Value of taxable services for the purposes of the Swachh Bharat Cess shall be the value as determined in accordance with the Service Tax (Determination of Value) Rules, 2006.

Notification No. 23/2015-Service Tax., Dated:November 12, 2015

Reverse Charge Mechanism to apply to SBC

Notification No. 30/2012-Service Tax dated 20.06.2012 prescribes the extent of Service Tax payable by the service provider and any other person liable to pay the Service Tax. (Reverse Charge Mechanism).

Now a notification is issued to stipulate that this Notification No. 30/2012-Service Tax dated 20.06.2012 shall be applicable for the purposes of Swachh Bharat Cess mutatis mutandis .

Notification No. 24/2015-Service Tax., Dated:November 12, 2015

Service Tax Rules Amended to provide for alternative rates:

As per sub-rules 7, 7A, 7B and 7C of rule 6 of the Service Tax Rules, there is an alternative rate of Service Tax for air travel agents, life insurance, foreign exchange and lottery. Now the alternative rate is fixed for Swachh Bharat Cess also for these services, which is Service Tax liability multiplied by 0.5 divided by 14. This is done by inserting a sub-rule 7D in rule 6 of the STR, 1994.

This notification comes into force from 15th November 2015.

Notification No. 25/2015-Service Tax., Dated:November 12, 2015

Government also issues clarifications

WHILE one section of the Board was busy in issuing these notifications, yet another section was busy issuing clarifications through the PIB. Maybe that Circular will be issued today.

The Board's Press Release states:

Some doubts are being raised with respect to the levy of Swachh Bharat Cess, such as,-

(i) what would be Swachh Bharat Cess on services where service tax is being paid under the alternative rates of service tax?

(ii) what would be the value of taxable services for computation of Swachh Bharat Cess?

(iii) whether reverse charge mechanism would apply for the levy of Swachh Bharat Cess?

(iv) what would be the point of taxation for Swachh Bharat Cess ?

Board clarifies that answers to the above queries are in the provisions of sub-section (5) of Section 119 of the Finance Act, 2015 by which all the provisions of service tax as contained in Chapter V of the Finance Act, 1994 have been made applicable to Swachh Bharat Cess. It is, thus, very clear that all the provisions including those related to computation of taxable value, assessment, exemption, payment, penalty applicable to service tax would also apply in respect of Swachh Bharat Cess.

If that was the case, what was the need for these notifications? Strangely, the Board Press Release does not make any mention about the notifications.

Point of Taxation:

The Press Release clarifies that:

(i) in case where payment has been received and invoice is raised before the service becomes taxable, i.e., prior to 15th November, 2015, there is no lability of Swachh Bharat Cess.

(ii) In case payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise.

(iii) Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date.

(iv) Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.

Board concludes that all issues relating to Swachh Bharat Cess are addressed in the Service Tax provisions itself by virtue of the applicability of Chapter V of the Finance Act, 1994 and the rules made thereunder.

Swachh Bharat Cess and CENVAT Credit - Board Does Not Clarify

NEITHER the Press Release, nor the Notifications issued yesterday clarifies as to whether Swachh Bharat Cess is cenvattable and whether Swachh Bharat Cess can be paid from CENVAT account. This is a major cause of concern and the Board should address it immediately. This requires amendment of the CENVAT Credit Rules - maybe yet another section in the Board is working on that.

Clarify immediately to avoid confusion and spread of different opinions

WE have come across the following opinions circulated by some leading lawyers:

(i) it seems benefit of Abatement Notification No. 26/2012-ST is not available and Swachh Bharat Cess will be leviable on total value and not abated value. It is advisable to file a representation to get the notification amended.

(ii) Cenvat Credit of Swachh Bharat Cess is not available.

(iii) Cenvat credit cannot be utilized for payment of Swachh Bharat Cess.

Assessees are worried and depend on consultants to advise them and if the Board is stoically silent, all kinds of advices will float around. An assessee who called me up was rather irritated that I couldn't clarify his doubts. “I have to plan my business strategy and revise my contracts”, he told me. Business plans don't happen at the speed with which Board issues notifications.

Board should have thought of all these problems and perhaps should have sought public opinion before hastily thrusting a new tax on the nation in the year of the taxpayer. They had eight months time to do it.

No CENVAT Credit?

It is heard that the view in the Government is that there would be no CENVAT Credit of Swachh Bharat Cess, because the tax is a low 0.5% and the Government wants the whole of it, cascading effect and GST notwithstanding.

And will the Board ever bother to clarify on the balance of Education Cess?

CESTAT Asst. Registrar seeks Information under RTI from CESTAT

AN assistant Registrar in CESTAT, New Delhi has sought information under the RTI Act from CESTAT as follows:

Please provide the copies of the filled up format submitted by all the Assistant Registrars, CESTAT, for preference of choice of station in case of transfers to the benches of CESTAT asked by the administration, CESTAT, New Delhi, during last three years.

He also submits:

The information can be furnished, the information sought for concerns my life and liberty, therefore the information may be furnished to me within 48 hours.

Without prejudice to my rights under the RTI Act 2005, to facilitate faster retrieval of information, I would like to state that the information could be available with registrar, CESTAT, New Delhi.

Until Monday with more DDT

Have a nice weekend.

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