Krishi Kalyan Cess – A presentation By: Keshav R Garg (B.Com, CA, CS, ISA(ICAI)) 3328, Sector 27 D, Chandigarh Ph: +91-172-461-3328 Mob: +91-9888-090-008 Mail: mygst.mytax@gmail.com

What is Krishi Kalyan Cess (KKC)?

• A Cess is a tax that is collected by the government to be used for specific purpose.

• The collection from levy of Cess can be used only for the purpose for which it is collected.

• Krishi Kalyan Cess has been introduced by the government w.e.f 01.06.2016 for improving agriculture facilities. (Section 161(2) of Finance Act 2016)

• The effective rate of Service Tax from 1st June 2016 would be: 14% (Service Tax) + 0.5% (Swachh Bharat Cess) + 0.5% (Krishi Kalyan Cess) = 15 %.

Point of taxation for service providers: KKC

• Rule 5 of Point of Taxation Rules 2011 (POTR) has been amended to include new services as well as new levy by the government. (10/2016 dated 01.03.2016)

• Rule 5 (a) provides that when the issuance of invoice and receipt of payment is made before the date of taxability then the service shall be non-taxable.

• Rule 5(b) provides that if the payment is received before date of taxability and invoice is issued within 14 days form the service becoming taxable for the first time, no service tax to be charged.

Analysis of Rule 5 of POTR 2011 S. No. Time of issuance

of invoice as well as amount of invoice

Time of receipt of payment as well as amount of payment received.

Position of Taxability

1. 30-05-2016 for Rs. 2,00,000

31-05-2016 for Rs. 2,00,000

Non Taxable as issue of invoice and receipt of payment before 01.06.2016

2. 30-05-2016 for Rs. 2,00,000

31-05-2016 for Rs 1,50,000

Non Taxable to the extent of 1,50,000. The balance 50,000 would be taxable if received after 01.06.2016

3. 3-6-2016 for Rs. 2,00,0000

28-05-2016 for Rs 2,00,0000

Non Taxable as receipt of payment before 1st June 2016 while invoice is issued within 14 days from taxability.

Analysis of Rule 5 of POTR 2011

S. No. Time of issuance of invoice as well as amount of invoice

Time of receipt of payment as well as amount of payment received.

Position of Taxability

4. 15-06-2016 for Rs. 4,00,000

24-05-2016 for Rs. 4,00,000

Taxable as essential requirement of issue of invoice within 14 days from date of service is not met.

5. Total consideration was 4 Lacs. On 28-05-2016 invoice was issued for 2.50 lacs and remaining on 20-06-2016

30-05-2016 for Rs. 4,00,000

Non Taxable to the extent of 2.50 lacs because part payment invoice issued after 14 days from date of receipt.

Point of taxation in reverse charge: KKC

• Rule 7 of Point of Taxation Rules 2011 (POTR) has been amended by the government. (21/2016 dated 30.03.2016)

• As per new proviso, KKC shall be paid by recipient where the services and invoice have been provided before 1st June 2016, No KKC shall be paid,

• If either services or invoice are issued after 1st June 2016, then KKC shall not be charged, the point of taxation shall be the date of payment.

Analysis of Rule 7 of POTR 2011

S. No.

Date of Service

Date of Invoice

Date of Payment

Applicability

1. 20-05-2016 28-05-2016 05-06-2016 Not Applicable as Invoice and service before 1st June 2016

2. 20-05-2016 02-06-2016 05-06-2016 Applicable Since Invoice issued after 1st June 2016 – Date of payment would be applied.

3. 02-06-2016 20-05-2016 05-06-2016 Applicable Since Services provided after 1st June 2016 – Date of payment would be applied.

4. 04-06-2016 10-06-2016 14-06-2016 Applicable- date of payment after 1st June 2016

Cenvat Credit of KKC • KKC Cenvat Credit shall be available only on

input services availed by output service provider.

• As per Cenvat Credit (Seventh Amendment) Rules 2016 only “Output Service providers” are eligible to claim Cenvat Credit of KKC.

• KKC can be setoff only against KKC outstanding and no other duty paid on input services.

• No Cenvat shall be allowable to a manufacturer etc for KKC paid by it on input service.

Analysis of Cenvat Credit/Refund:

S. No. Description Recipient Allowed or Not Allowed

1. KKC charged by Chartered Accountant service received by manufacturer

Manufacturer Not Allowed

2. KKC charged by Architect to a Chartered Accountant

Output Service Provider

Cenvat Allowed

3. KKC charged by Architect to SEZ Unit

Exporter Refund applicable

4. KKC charged to exporter of service

Exporter of service

Refund (29/2016 dated 26.05.2016)

KKC in case of Abated Services &

Valuation Rules • It has been provided by the government that the

KKC shall be charged by the service provider only on that percentage of taxable value which is specified in column (3) i.e. on abated value of abatement notification no. 26/2012.

• The value of Krishi Kalyan Cess shall be the value as determined in accordance with Service Tax (Determination of Value) Rules 2006.

Few Illustrative rates for KKC

S. No. Description of Service

Taxable Value KKC

1. Transport of passengers by rail.

30% 0.5% X 30% = 0.15%

2. Restaurant Services 40% 0.5% X 40% = 0.2%

3. Works Contract 40% 0.5% X 40% = 0.2%

4. Outdoor catering 60% 0.5% X 60% = 0.3%

5. Financial Leasing Including Hire Purchase

10% 0.5% X 10% = 0.05%

6. Packaged Tour Service

25% 0.5% X 25% = 0.125%

By:

Keshav R Garg

(B.Com, CA, CS, ISA(ICAI))

Member of: Indirect Tax Committee of PHD Chambers

Indirect Tax Committee of CII Indirect Tax Committee of MyGst.MyTax Foundation

Co-Author – A Handbook on Goods & Service Tax Author with Service Tax Review by R K Jain

3328, Sector 27 D, Chandigarh

Ph: +91-172-461-3328 Mob: +91-9888-090-008

Mail: mygst.mytax@gmail.com