A Brief Overview of Swachh Bharat Cess

This brief note analyses the introduction of the Swachh Bharat Cess in 2015 under the Finance Act. The cess has been introduced to involve citizens in the Clean india movement. There are still some clarifications to be made about the working of the cess on certain taxable services.

Fri Jul 22 2022 | Govt. Agencies and Taxation | Comments (0)

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The Central Government, vide Union Budget 2015, proposed to levy a Swachh Bharat Cess (SBC) at the rate of 2 per cent on the value of taxable services to finance and promote its Swachh Bharat initiative from the date to be notified.

Swachh Bharat Cess is not another tax but  a step towards involving each and every citizen in making contribution to Swachh Bharat. The 0.5% levy will translate into a tax of 50 paisa only on every Rs 100 worth of taxable services.

The government has taken this action to provide a boost to the ‘Clean  India’ initiative. The Swachh Bharat cess will be an additional levy, making the effective service tax rate 14.05% against the current 14%.

The Notification has been introduced Chapter VI under the Finance Act, 2015 to levy SBC at the rate of 0.5 percent on the value of taxable services from 15 November 2015.

The Swachh Bharat Cess (SBC) will be treated as service tax and the provision related to the levy and collection of service tax including exemption and refund, would also apply to SBC in the same manner as it applies to service tax. SBC will apply on the value after Abatement i.e. on the net taxable value.

Although SBC is referred to as a cess, it is yet applicable  on the value of taxable services and not on the amount of service tax.

Issues related to Swachh Bharat Cess

This has become effective from November 15th, 2015 but still there are some clarifications to be made by the Government:

Availability of CENVAT credit to the recipient of services.

Applicability of SBC on services covered under Rule 6 of the Service Tax Rules,1994 (i.e. air travel agent, life insurance premium, purchase and sale of foreign currency, where service tax is paid on a presumptive basis)

The other issue with the applicability of SBC is that the service providers/receivers might have to make changes in the invoices so as to separately reflect the SBC on the invoices and also examine its impact at  the time  of taxation, to determine the applicability of SBC in cases where the services/invoice/payment have been made before the effective date i.e. 15 November 2015.

Conclusion

In the past also various such initiatives have been taken up by the Indian Government but not all have  been successful. The same goes for Swachh Bharat Cess,  as its not just the collection which would help in making India clean but also a proper allocation and appropriation of the same. 

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