Tuesday, June 14, 2016

Krishi Kalyan Cess

There are some of the points which should be considered by the Assessee regarding  Krishi Kalyan Cess:
1.       Krishi Kalyan Cess is a new cess introduced by Government of India through Finance bill 2016. It is to be levied at rate of 0.5% on value of all Taxable services. As stated by the Finance Minister , collection from Krishi Kalyan Cess (abbreviated as KKC),  is to be "exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers".
2.       KKC is leviable on the taxable value of services at the rate of 0.5%, with effect from 01.06.2016 as provided in Chapter VI, clause 158 of Finance Act, 2016.
3.       It should be noted that determination of value of service in respect of KKC will be done in accordance with the service Tax Valuation Rules i.e.  Service Tax Valuation Rules are equally applicable in relation to  KKC.
4.       Cenvat credit in respect of KKC is available as per Notification No.: 28/2016 dated 28.05.2016. As per this Notification Cenvat Credit shall be utilized only for the payment of KKC. As the cenvat credit on KKC can only be utilized only for the payment of KKC, therefore separate accounts needs to be maintained.
5.       KKC  shall be levied only on taxable services . As per the Notification no. 28/2016 dated 26.05.2016, which provides that KKC shall not be leviable on service which are exempt or Non-Taxable and not even on services mentioned in Negative List.
6.       It must be noted that KKC is to be calculated on the value of taxable service after availing the benefit of abatement.
7.       A separate Accounting head is provided for Krishi Kalyan Cess, which is as follows:
KKC (Minor Head)
Tax Collection
Other Receipt (Interest) 
Deduct Refunds

8.       In case of Reverse Charge Mechanism, the recipient of services shall pay KKC  at rate of 0.5% along with service Tax payable by him as it is done in case of Swachh Bharat Cess.
9.       The Assessee must note that KKC shall be disclosed on the invoice separately, in the same manner as Swachh Bharat Cess is disclosed.   
    Contributed by Mohd Sharjeel Awasi ( CA Finalist and Licentiate Company Secretary)